Dellars per unit ATC 20 100 150 200 250 Know how to answer basic firm behavior q

Question

Dellars per unit ATC 20 100 150 200 250 Know how to answer basic firm behavior questions for a firm in a perfectly competitive market (for example, using the above graph) o What is optimal quantity? o What is price? o What is total cost if producing at optimal quantity? What Is total revenue If producing at optimal quantity? What is profit if producing at optimal quantity? o o Chapter 8-8 questions Characteristics of monopoly market .How monopolists maintain monopoly markets s/Q MC $30 ATC AVC 10 IMR 0 50 100 150 200 Know how to answer basic firm behavior questions for a monopolist (for example, using the above graph) . o What is optimal quantity? o What is price? o What is total cost if producing at optimal quantity? What is total revenue if producing at optimal quantity? What is profit if producing at optimal quantity? o o

Explanation / Answer

In perfectly competitive market, at profit maximisation MR =MC

Optimal quantity = 200

Price = $28

Total cost = ATC *quantity = 22*200 = 4400

Total revenue = price *quantity = 28*200 = 5600

Profit = total revenue - total cost = 5600 - 4400 = 1200

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