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    Exercise 04

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    (1) The firm is operating under perfect competition and production data including output, total costs, marginal costs, average total costs, average fixed costs and average variable costs is given for various output levels. (2) If price is $20, the firm will maximize profits by producing an output of 18 units. (3) At the profit-maximizing output of 18 units, the firm's profits are $175 - $150 = $25.

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    Exercise 04

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    Lê Thảo
    25 views2 pages
    (1) The firm is operating under perfect competition and production data including output, total costs, marginal costs, average total costs, average fixed costs and average variable costs is given for various output levels. (2) If price is $20, the firm will maximize profits by producing an output of 18 units. (3) At the profit-maximizing output of 18 units, the firm's profits are $175 - $150 = $25.

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    (1) The firm is operating under perfect competition and production data including output, total costs, marginal costs, average total costs, average fixed costs and average variable costs is given for various output levels. (2) If price is $20, the firm will maximize profits by producing an output of 18 units. (3) At the profit-maximizing output of 18 units, the firm's profits are $175 - $150 = $25.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    25 views2 pages

    Exercise 04

    Uploaded by

    Lê Thảo
    (1) The firm is operating under perfect competition and production data including output, total costs, marginal costs, average total costs, average fixed costs and average variable costs is given for various output levels. (2) If price is $20, the firm will maximize profits by producing an output of 18 units. (3) At the profit-maximizing output of 18 units, the firm's profits are $175 - $150 = $25.

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    Question 1 (5 marks)

    Given the following information about a firm under perfect competition:

    Q TC MC ATC AFC AVC


    0 50 7.5 na na na
    10 125 5 12.5 5 7,5
    12 135 2.5 11.25 4,17 7,08
    14 140 5 14 3,57 6,43
    16 150 10 9.375 3,125 6,25
    17 160 15 9.41 2,94 6,47
    18 175 7.5 9.72 2,78 6,94
    20 215 10.75 2,5 8,25

    (a) Calculate the firm’s MC, ATC, AFC, and AVC, for the given levels of output.

    (b) If the price of the product is $20, at what output will the firm maximize its profits?

    (c) Calculate the profits at the above profit-maximizing output?

    (d) At what price should the firm shut down operations in the short run?

    (e) At what price should the firm enters the market in the long run?

    (f) At what price should the firm exits the market in the long run?

    (g) At what price should the firm stays in the market in the long run?

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