Figure 12-18 Revenue and cost MC (dollars per unit) $40 MR ATC AVC 24 20 14 12 8

Question

Figure 12-18 Revenue and cost MC (dollars per unit) $40 MR ATC AVC 24 20 14 12 8 0 55 100 150 200 Quantity 10. Use the figure above to answer the following questions a. How can you determine that the figure represents a graph of a perfectly competitive firm? Be specific; indicate which curve gives you the information and how you use this information to arive at your conclusion. b. What is the market price? c. What is the profit-maximizing output? d. What is total revenue at the profit-maximizing output? e. What is the total cost at the profit-maximizing output? f. What is the profit or loss at the profit-maximizing output? g. What is the firm's total fixed cost? h. What is the total variable cost? i. Identify the firm's short-run supply curve j. Is the industry in a long-run equilibrium? k. If it is not in long-run equilibrium, what will happen in this industry to restore long-run equilibrium? 1. In long-run equilibrium, what is the firm's profit maximizing quantity?

Explanation / Answer

(a)-It is competitive market because average total cost curve is rising for large production.

(b)= Market price P=MC=MR=$ 40

(c)- Profit maximizing output

MR=MC

at Q=200

(d)- Total revenue= P*Q =(40) (200) =$ 8000

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