1. Complete the following schedule of data for a perfectly competitive firm. Q T

Question

1. Complete the following schedule of data for a perfectly competitive firm.

Q TC ATC MC PRICE TR MR PROFIT

0$ 20.00 ______ $26.50 ______ ______

_______ ______

131.50 ______ ______ ______ ______

_______ ______

2 38.00 ______ ______ ______ ______

_______ ______

3 42.50 ______ ______ ______ ______

_______ ______

4 48.00 ______ ______ ______ ______

_______ ______

5 57.50 ______ ______ ______ ______

_______ ______

6 74.00 ______ ______ ______ ______

_______ ______

7 100.50 ______ ______ ______ ______

_______ ______

8 140.00 ______ ______ ______ ______

_______ ______

9 195.50 ______ ______ ______ ______

_______ ______

10 270.00 ______ ______ ______ ______

a. What levels of output would maximize profits?

b. What are the values of MC and MR between these levels of output?

c. Draw a graph depicting MC, ATC, MR, and Price.

Explanation / Answer

The profit maximizing rule for production is produce Q where MR=MC Because P=MR in in perfectly competitive firm (MR=D=AR=P or "Mr DARP") we can look at the price of 17 and know that Quantity 19 is optimal. Subsequently, Q at Price b, c and d is Q 17, 12, and 8 respectively.

Q TFC TVC TC AFC AVC ATC MC P 7 100 50 150 14.29 7.14 21.43

8 100 56 156 12.50 7.00 19.50 6 Price d 9 100 63 163 11.11 7.00 18.11 7
10 100 71 171 10.00 7.10 17.10 8
11 100 80 180 9.09 7.27 16.36 9
12 100 90 190 8.33 7.50 15.83 10 Price c 13 100 101 201 7.69 7.77 15.46 11
14 100 113 213 7.14 8.07 15.21 12
15 100 126 226 6.67 8.40 15.07 13
16 100 140 240 6.25 8.75 15.00 14
17 100 155 255 5.88 9.12 15.00 15 Price b 18 100 171 271 5.56 9.50 15.06 16
19 100 188 288 5.26 9.89 15.16 17 Price a 20 100 206 306 5.00 10.30 15.30 18

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