The above figure shows Annetta’s potatoes which is a perfectly competitive firm.
ID: 1156414 • Letter: T
Question
The above figure shows Annetta’s potatoes which is a perfectly competitive firm. Suppose the price of a pound of potatoes is $7. Answer and explain your answers to the following questions.
a) How many pounds of potatoes will Annetta’s potatoes produce?
b) Find Annetta’s potatoes average total, average variable, and marginal costs?
c) Find Annetta’s potatoes total, total variable, and total fixed costs?
d) Find Annetta’s potatoes total revenue and economic profit?
e) What will happen in this market in the long run?
MC 1 ATC AVO 50 40 Output (units per day) 0 20 30Explanation / Answer
a) At price of $7, 40 pounds of potatoes are produced
b) ATC =$4, AVC=$3 MC =$7
c) TC = 4*40=160, TVC= 3*40 = $120, TFC = 160-120 = $40
d) TR = 7*40 = 280, Economic profit = TR-TC = 280-160 = 120
e) Because of positive economic profit many new firms would enter the market
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