Question

This is a firm in a perfectly competitive market. The selling price is $5.

Fill in the table below and enter the answers to the questions down below:

1-How many units should be produced?

2- What will be the profit per unit?

3- What will be the total profit?

4- If the price were to drop to $4 how many units should be produced?

5- What will be the total profits?

6- If the price falls to $1, how many units should be produced?

7- At what price will you break even?

8- At what price should the company close down?

9- At what price will you be minimizing losses?

Quantity             TC         ATC       AVC       MC        TR              AR         MR        Profit/unit          Total profit

0                         10

1                         15

2                         18

3                         20

4                         21

5                         23

6                         26

7                         30

8                         35

9                         41

10                       48

11                       56

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Answers:

1=

2=

3=

4=

5=

6=

7=

8=

9=

Answer 1

Answer

Profit/ Total Q TC ATC AVC MC TR AR MR Unit Profit 0 10 0.00 - 10.00 1 15 15.00 5.00 5 5.00 55.00 - 10.00 - 10.00 2 18 9.00 4.00 3 10.00 55.00 -4.00 -8.00 20 6.67 3.33 2 15.00 55.00 -1.67 -5.00 21 5.25 2.75 1 20.00 55.00 -0.25 -1.00 5 23 4.60 2.60 2 25.00 5 5.00 0.40 2.00 6 26 4.33 2.67 3 30.00 5 5.00 0.67 4.00 30 4.29 2.86 4 35.00 55.00 0.71 5.00 8 35 4.38 3.13 540.00 55.00 0.63 5.00 9 41 4.56 3.44 645.00 5 5.00 0.44 4.00 10 48 4.80 3.80 7 50.00 5 5.00 0.20 2.00 11 56 5.09 4.18 8 55.00 55.00 -0.09 -1.00

Answer

1. 7

The profit Maximises at both when Quantity is 7 and 8. But being in perfect competiton the quantity of 7 is better.

2. $0.71 per unit

3. $5

Q TC ATC AVC MC TR AR MR Unit Profit 0 10 0.00 -10.00 1 15 15.00 5.00 5 4.00 4 4.00 -11.00 -11.00 2 189.00 4.00 38.00 4 4.00 -5.00 - 10.00 3 20 6.67 3.33 2 12.00 4 4.00 -2.67 -8.00 21 5.25 2.75 1 16.00 4 4.00 -1.25 -5.00 23 4.60 2.60 2 20.00 4 4.00 -0.60 -3.00 6 26 4.33 2.67 3 24.00 4 4.00 -0.33 -2.00 7 30 4.29 2.86 4 28.00 4 4.00 -0.29 -2.00 8 35 4.38 3.13 5 32.00 4 4.00 -0.383.00 9 41 4.56 3.44 6 36.00 4 4.00 -0.56 -5.00 10 48 4.80 3.80 7 40.00 44.00 -0.80 -8.00 11 56 5.09 4.18 8 44.00 44.00 -1.09 - 12.00 ovo AWN-

4. 6 units

The profit Maximises at both when Quantity is 6 and 7. But being in perfect competiton the quantity of 6 is better.

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