xQuiz: Week 8: Final Exam Web Search re.com/courses/16723/quizzes/46425/take Con

Question

xQuiz: Week 8: Final Exam Web Search re.com/courses/16723/quizzes/46425/take Concur M gmailESC Concur e Bible.com w waipedia-Login l Salesforce , Fidelity Question4 20 pts (TCO C) Answer the next questions (Parts A and B) on the basis of the following cost data for a firm operating in pure competition. (20 points) Output TFC TVC 0 $200.00 000 1 $200 00 50.00 2 $200.00 120 00 3 $200 00 200.00 4 $200 00 300.00 5 $200 00 450 00 6 $200.00 650.00 (Part A) Refer to the above data. If the product price is $75 at its optimal output will the firm realize an economic profit break even, or incur an economic loss? How much will the profit or loss be? Show all calculations (10 points) (Part B) Refer to the above data If the product price is $100 at its optimal output will the firm realize an economic profit break even or incur an economic

Explanation / Answer

Ans:

Table showing total cost and marginal cost

The optimal output or profit maximizing level of output is where marginal revenue(i.e price) is equal to marginal cost.

A) when price is $75, optimal output = 2 units

   loss = (2 * $75) - $320

= $150 - $320

   = -$170

B) when price is $100, optimal output = 4 units

   loss = (4 * $100) - $500

= $400 - $500

= -$100.

Output TFC TVC TC MC 0 $200 $0 $200 $200 1 $200 $50 $250 $50 2 $200 $120 $320 $70 3 $200 $200 $400 $80 4 $200 $300 $500 $100 5 $200 $450 $650 $150 6 $200 $650 $850 $200

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