Use the following cost data to answer all six questions: three for a purely comp

Question

Use the following cost data to answer all six questions: three for a purely competitive producer and three for a monopolist. Be sure to show your work!

Answer parts a, b, and c assuming the firm is a perfect competitor.

a. At a product price of $30, will the firm produce in the short run? Why or why not?

b. If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Explain.

c. What economic profit or loss will the firm realize?

Answer parts d, e, and f assuming the firm is a monopolist facing a demand curve of P=50-Q:

d. Will this monopolist produce in the short run? Why or why not?

e. If it is preferable to produce, what will be the monopolist's profit-maximizing or loss-minimizing output? Explain.

f. What economic profit or loss will the monopolist realize?

Average Average Average TotalFixedVariable Total FixedVariableTotalMarginal ProductCost Cost Cost Cost Cost Cost Cost $80 $80 $80 $80 $80 $80 $80$135.00 $215.00 $13.33$22.50 $35.83 $37.50 $80$187.50 $267.50$11.43 $26.79$38.21 $52.50 $80$255.00 $335.00 $10.00 $31.88$41.88$67.50 0 0$80.00 0 0 0 $15.00 $95.00 $80.00 $15.00 $95.00$15.00 $27.00$107.00 $40.00 $13.50 $53.50$12.00 $45.00$125.00 $26.67 $15.00 $41.67$18.00 S67.50$147.50 $20.00 $16.88$36.88$22.50 $97.50$177.50 $16.00 $19.50$35.50$30.00 4 7

Explanation / Answer

A)yes firm will produce because price>min of AVC.

B)profit maximisation or loss minimiser is at a point where MR=MC thus Q=5 is the loss minimizer output

C)loss=(35.83-30)*5=29.51

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