20 17 14 0 40 50 55 80 A) What is the profit maximizing output level for this pe
ID: 1163426 • Letter: 2
Question
20 17 14 0 40 50 55 80 A) What is the profit maximizing output level for this perfectly competitive firm? B) What is the profit maximizing price this perfectly competitive firm will charge? C) The total revenue of this perfectly competitive firm is equal to? D) What is the ATC of this perfectly competitive firm when it maximizes its profit? E) What is the total cost of producing the profit maximizing output? F How much profit does this perfectly competitive firm earn when it maximizes its profit? G) What is the profit per unit when the perfectly competitive firm maximizes its profit? H) What production period is this perfectly competitive firm producing in? I) What should this perfectly competitive firm do? J) Explain why it should do this.Explanation / Answer
a) Th profit-maximizing level of the firm is 50.
b) The price the firm will charge will be 14.
c) Total revenue = Q x P = 50 x 14 = 700.
d) ATC is 9.
e) Total cost = Q x C = 50 x 9 = 450.
f) profit = TR -TC = 700 - 450 = 250.
g) Profit per unit = Profit / total output = 250/50 = 5.
h) The firm is producin under economies of scale.
i) They should increase the production level of the firm.
j) Becasue the average total cost of the firm is still falling when the competetive firm is producing at the output level 50.
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