Question

Assume that the cost data in the following table are for apurely competitive producer

Total Average Average Average Marginal

Product Fixed cost Variaiblecost TotalCost Cost

0

1 $60.00 $45.00 $105.00 $45

2 30.00 42.50 72.50 35

3 20.00 40.00 60.00 35

4 15.00 37.50 52.50 30

5 12.00 37.00 49.00 35

6 10.00 37.50 47.50 40

7 8.57 38.57 47.14 45

8 7.50 40.63 48.13 55

9 6.67 43.33 50.00 65

10 6.00 46.50 52.50 75

a. At a product priceof $56, will this firm produce in short run? If it is preferableto

Produce, whatwill be the profit-maximizing or loss-minimizing output?

What economyprofit or loss will the firm realize per unit of output?

b. Answer the questions of 4aassuming a producer price is $41.

c. Answer the question of 4 a assumingproducer price is $32.

d. In the table below,complete the short-term supply schedule for firm

(columns 1 and 2 ) andindicate the profit or loss incurred at each output (column 3.

(2) (4)

Quantity (3) Quantity

(1) Supplied Profit(+) Supplied

Price Single Firm or Loss(-) 1,500 Firms

$26 --------- $-------- -------------

32 ---------- --------- -------------

38 ----------- ---------- ---------------

41 ------------ ---------- ----------------

46 ------------- ------------ ---------------

56 -------------- ------------- ---------------

66 --------------- -------------- ----------------

e. Now assume that there are1,500 identical firms in this competitive industry; that is,

there are 1,500 firmseach of which has the cost data shown in the table.

Complete the industrysupply schedule (column 4).

f. Suppose the market demand data for the product are asfollows

Total Quantity

Price Demanded

$26 17,000

32 15,000

38 13,500

41 12,000

46 10,500

56 9,500

66 8,000

What will be the equilibrium price? What will be the equilibriumout for the industry?

For each firm? What will profit or loss be per unit? Per Firm?Will this industry expand or contact in the long run?