Answer the next questions on the basis of the following cost data for a firm ope

Question

Answer the next questions on the basis of the following cost data for a firm operating in pure competition: OUTPUT ------ TFC ---------- TVC 0 $500.00 0.00 1 500.00 70.00 2 500.00 130.00 3 500.00 170.00 4 500.00 200.00 5 500.00 300.00 6 500.00 510.00 (a.) (15 points) Refer to the above data. If the product price is $185 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations. (b.) (15 points) Refer to the above data. If the product price is $200 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations

Explanation / Answer

a. Output TFC TVC Total Cost xxxxxxxxxx xxxxx xxxxxxx Profit/(loss) 0 500 x 500 x x (500) x xxx xx xxx 185 xxx * (385) x 500 xxx 630 185 370 x (260) 3 500 xxx xxx 185 xxx * xxxxx 4 xxx 200 xxx xxx xxx x xx x xxx xxx 800 xxx xxx x 125 x xxx 510 xxxx xxx 1110 * 100 The optimal output is xx xxx firm xxxx incur xx xxxxxxxx loss of xxxx xxxxx xxxx will incur xx economic profit xx xx b. xxxxxx TFC TVC Total Cost xxxxxxxxxx Total xxxxxxx xxxxxxxxxxxxx x xxx x xxx x * xxxxx 1 xxx 70 xxx 200 200 x (370) x xxx xxx 630 200 xxx x xxxxx x xxx 170 670 200 600 x xxxx x 500 200 xxx 200 800 * xxx 5 xxx xxx 800 200 1000 x xxx x xxx xxx 1010 200 xxxx * xxx The optimal output is 6. The xxxx xxxx xxxx xx economic xxxxxx xx $110. 5.The xxxx xxxx xxxxx xx xxxxxxxx xxxxxx of 200

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