O. O A n. 5 G - Documenti Q- Search in Document Home Insert Design Layout Refere

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O. O A n. 5 G - Documenti Q- Search in Document Home Insert Design Layout References Mailings Review View + Share a Times New Ro... 12 A. Ar fi : A = = = = E + 1 AaBbccddee Aa Bbcddee AaBbccdc AaBbccddee Aa Bb AaBbccdde AaBCCDDEE AE B 1 U - alde X2 X A. 8-A. = = = = = A - D Normal No Spacing Heading iHeading 2 Title Subtitle Subtle Emph. Emphasis Styles lui Ludul Question 1: Firms in Competitive Markets Refer to the following scenario answer questions - a through : Scenario: The below information applies to a competitive firm that sells its output (P) for S40 per unit. . When the firm produces and sells 150 units of output, its average total cost (ATC) is $24.50. When the firm produces and sells 151 units of output, its average total cost (ATC) is $24.55. 1. (12 point) When the firm produces 150 units of output, its total cost is? 2. (2 point) Let Q represent the quantity of output. Which of the following magnitudes has the same value at Q = 150 and at Q= 151? (please circle one) Average Fixed Cost/Average Revenue / Total Cost / Total Revenue c. (2 point) When the firm produces 150 units of output, how much is its profit? [Hint: profilt = (P-AICKO Use the space provided below each question or in yellow|cells to write-down your answers. .................................. 4. point) Suppose the firm is producing 150 units of output and its fixed cost (FC) is $975. Then I, Iis variable cost (VC) amounts to? [Hint: Total cost of 150 units from part (a)] ii. Its average variable cost (AVC) amounts to? 5. U point) When the firm increases its output from 150 units to 151 units, its profit ii. By how much dollars? [Hint: Find profit for 151 units and compare with part (c)} 6. (1 poin) When the firm increases its output from 150 units to 151 units, what is its marginal cost? [Flint: First find the total cost of 150 and 151 units separately (i.e., TC - ATC *Q), then find MC] 7. (1/2 poinr) When the firm increases its output from 150 units to 151 units, what is its marginal revenue? [Hint: First find total revenue of 150 and 157 units separately (i.e., TR - PXO), then find MR] 8. (12 point) How does the firm's marginal revenue (MR) compare to its imarginal cast (MC) when it increases its output from 150 units to 151 units? [Hint: compare part g and part / 9. (2 point) Suppose the firm is currently producing and selling 150 units of output. Should the firm increase its output to 151 units? Briefly explain why. please circle one Increases / Decreases E R S = O Focus - Page 1 of 2 602 WordsE English (US) 0 + 112%

Explanation / Answer

1) When firm produces 150 units of output.

its total cost = average total cost * 150

Total cost = 24.50 *150 = $3675

2) The answer is B -) AVerage revenue.

3) profit =TR -TC

profit = 6000 - 3675 = 2325

so, profit = $2325

4) we know that , TC = FC + VC

so, VC = TC -FC

VC = 3675-975 = $2700

5) Profit of 151 units of output = 6040 - 3707.05

profits = 2332.95

so profits increases by $7.95

6)MC = 3707.05 - 3675

MC = $32.05

7) MR = 6040 - 6000 = 40

MR = $40

8) The firm marginal revenue is increased and the firm marginal cost also increased but MR is still greater than MC.

9) yes, firm should increase it output, since the marginal revenue is greater than marginal cost.

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