At a product price of$56, will this firm produce in the short run? If it is pref
ID: 1116810 • Letter: A
Question
At a product price of$56, will this firm produce in the short run? If it is preferable to produce, what will be the profit-maximizing or loss-maximizing output? What economic profit or loss will the firm realize per unit of output?
21-4 (Key Question) Assume the following cost data are for a purely competitive producer Total Product AverageAverageAverage variable cost fixed cost total cost Marginal cost S45 40 35 $60.00 30.00 20.00 15.00 12.00 10.00 8.57 7.50 6.67 6.00 $45.00 42.50 40.00 37.50 37.00 37.50 38.57 40.63 43.33 46.50 $105.00 72.50 60.00 52.50 49.00 47.50 47.14 48.13 50.00 52.50 65 At a product price of $56, will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Explain. What economic profit or loss will the firm realize per unit of output? Answer the relevant guestions of 4a assuming product nnee a. b.Explanation / Answer
Yes the firm will produce in short run at price of $56.
Because at this price firm is able to recover its total cost and earn some profit.
For profit maximizing or loss-minimizing,
Marginal cost=Price
At output=8
MC=55, P=56
This is almost equality
Profit maximizing or loss-minimizing output will be 8.
At output=8
Profit = Total revenue-total cost = P*output-ATc*output = 56*8-48.13*8 = 62.96
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