The next question refers to the following: Total cost schedule for a competitive

Question

The next question refers to the following:
Total cost schedule for a competitive firm:
Output        Total Cost
0                $ 10
1                   60
2                   80
3                   110
4                   165
5                   245

If market price is $60, how many units of output will the firm produce?
(Points : 3)

a. Zero units of output because the firm shuts down.
b. 1 unit of output.
c. 2 units of output.
d. 3 units of output.
e. None of the above.


2. If market price is $60, what is the maximum profit the firm can earn?

a. -$10
b. Zero profit, the firm shuts down
c. $75
d. $80
e. $85

Explanation / Answer

Hence best output = 4 units => ANswer is e) none of these

A2) ANswer is c) $75

Output        Total Cost Market price Profit = Market price * output - Total cost at this output 0                $ 10 60 -10 1                   60 60 0 2                   80 60 40 3                   110 60 70 4                   165 60 75 5                   245 60 55

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