Question

Question 2 Assume that a firm involves on a competitive market. There are 50 firms. Variable Marginal Cost Cost 1300 AVC Quantity 0 ATC 15 175 102.5 Total Cost 130 175 205 235 255 280 310 350 410 490 30 20 20 76.3 C7.75 yo Sy. 9 a) Fill this table. b) Find the shutdown point. c) Find the break-even point. d) Now, suppose that the demand is given by Quantity demanded 200 300 400 500 600 700 Price 90 20 800 900 1000 1100 10 Find the optimal quantity to produce.

Please help!

Answer 1

Q	TC	VC	MC	AVC	ATC
0	130	0
1	175	45	45	45.0	175.0
2	205	75	30	37.5	102.5
3	235	105	30	35.0	78.3
4	255	125	20	31.3	63.8
5	280	150	25	30.0	56.0
6	310	180	30	30.0	51.7
7	350	220	40	31.4	50.0
8	410	280	60	35.0	51.3
9	490	360	80	40.0	54.4

Shut down point is at min AVC = $30

Break Even Point is at min ATC = $50

Optimal Output is 420 units at a price of $68 approx. Optimal industry output is determined at intersection of demand and supply curves. For a firm 420/50 = 8.4 is the output

AVC = VC./Output so VC = AVC*Q
Also at Q=0, TC = FC and VC= 0, so FC = 130 at all levels of output,
we know TC=FC+VC, so VC = TC - 130 at all levels of output

| VC | MC | AVC | AIC | IC 130 175 0 1 45 45.0 205 75 45 30 30 Price 105 37.5 35.0 31.3 30.0 125 20 235 255 280 310 350 410 150 180 220 280 360 30.0 175.0 102.5 78.3 63.8 56.0 51.7 50.0 51.3 54.4 25 30 40 60 80 100 200 300 600 700 800 900 400 500 Quantity 31. 4 35.0 40.0 9 490 - Qd - Os Price Qd 300 60 500 Qs 450 400 350 300 700 800 30

| VC | MC | AVC | AIC | IC 130 175 0 1 45 45.0 205 75 45 30 30 Price 105 37.5 35.0 31.3 30.0 125 20 235 255 280 310 350 410 150 180 220 280 360 30.0 175.0 102.5 78.3 63.8 56.0 51.7 50.0 51.3 54.4 25 30 40 60 80 100 200 300 600 700 800 900 400 500 Quantity 31. 4 35.0 40.0 9 490 - Qd - Os Price Qd 300 60 500 Qs 450 400 350 300 700 800 30