Answer the following questions I, Answer the questions below on the basis of the

Question

Answer the following questions I, Answer the questions below on the basis of the following cost data for a firm which is selling in a competitive market. OutputALC ATC MC 80,00 40.00 26.66 20,00 6.00 13,33 11.42 10.00 8.88 8.00 7.27 6.66 6.15 20,00 18.50 17.37 16.25 15.40 5.00 14.87 16.13 100.00 58.00 44.00 36.25 31.40 28.33 26.29 26,13 26.56 27.30 28.45 30.00 31.92 20 17 15 13 12 13 14 30 34 21.18 23.34 25.77 12 13 Determine what is the firm's profit maximizing or loss minimizing level of output (if any), and how large are the profits or losses (a) if price is $12; (b) if price is $26. (Show all of your calculations) (o) p 31 (ab) A()

Explanation / Answer

a) When P = 12 we look for MC where it is 12. MC is 12 when Q = 5. At this level, profit = (P - ATC)*Q = (12 - 31.40)*5 = -97. Hence economic loss is -97. (You have to take total cost when economic profit or loss is computed)

b) When P = 26 we look for MC where it is 26. MC is closest to 25 when Q = 8. At this level, profit = (P - ATC)*Q = (25 - 26.13)*8 = -9.04. Hence economic loss is -9.04.

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