1. Answer the questions below using the following information on a firm: Output
ID: 1151107 • Letter: 1
Question
1. Answer the questions below using the following information on a firm:
Output (Quantity)
Total Cost
0
$50
1
60
2
80
3
110
4
150
5
200
6
260
7
330
8
410
a. What is average total cost at Q=6?
b. What is marginal cost at Q =6?
c. Is this firm operating under increasing or diminishing returns at Q=6? Why?
d. Say this firm is a perfect competitor. If the market price for its product is $ 50, at what output level will it produce at (to maximize profits)?
e. Say this firm is a profit-maximizing monopolist. If the firm is maximizing profit where marginal revenue equals $40, at what output level will this firm be producing?
Output (Quantity)
Total Cost
0
$50
1
60
2
80
3
110
4
150
5
200
6
260
7
330
8
410
Explanation / Answer
Output (Quantity)
Total Cost
ATC
MC
TR at P=$40
Profit at Monopoly competition
0
50
0
-50
1
60
60.00
10
40
-20
2
80
40.00
20
80
0
3
110
36.67
30
120
10
4
150
37.50
40
160
10
5
200
40.00
50
200
0
6
260
43.33
60
240
-20
7
330
47.14
70
280
-50
8
410
51.25
80
320
-90
a. From the above table, at Q=6, ATC = 43.33
b. From the above table, at Q=6, MC = 60
c. As MC is increasing it is operating at diminishing returns
d. Perfect competition, MC=MR = 50, produces Q = 5
e. Profit-maximisation is at where Q= 4
Output (Quantity)
Total Cost
ATC
MC
TR at P=$40
Profit at Monopoly competition
0
50
0
-50
1
60
60.00
10
40
-20
2
80
40.00
20
80
0
3
110
36.67
30
120
10
4
150
37.50
40
160
10
5
200
40.00
50
200
0
6
260
43.33
60
240
-20
7
330
47.14
70
280
-50
8
410
51.25
80
320
-90
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