6 A firm in a purely com ndustry is currently producing 1,000 units per day at a

Question

6 A firm in a purely com ndustry is currently producing 1,000 units per day at a total cost of $500. If the firm produced 800 units per day, its total cost would be $350, and if it produced 500 units per day, its total cost would be $325. Instructions: Round your answers to 2 decimal plac a. What are the firm's ATC at these three levels of production? At 1,000 units per day, ATC - 14 28 points At 500 units per day, ATC b If every firm in this industry has the same cost structure, is the industry in long-run competitive equilibrium? c. From what you know about these firms cost structures, what is the highest possible price per unit that could exist as the market price in long-run equilibrium? 7:39 PM

Explanation / Answer

a) ATC when the production is 1,000 is 1000/500 = $2.

the ATC when the firm is producing 800 is 800/350 = $2.28.

The ATC when the firm is producing only 500 unit is 500/325 = $1.53

ATC = Total quantity produced / total cost.

b) Yes, if the companies have same cost structures they will be making zero economic profit, that means they are in the long run.

c)The highest price could be $2. in a perfectly competitive market the ATC is equal to the price. the highest ATC here is $2.  

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