Use the Figure above to answer each of the following questions. What type of fir
ID: 1191601 • Letter: U
Question
Use the Figure above to answer each of the following questions. What type of firm is depicted in the figure? If the firm would produce and sell an additional unit of output, by how much would its total revenue change? What is the firm's profit-maximizing output level? What is the firm's total revenue at the profit-maximizing quantity? What is the firm's average total cost at the profit-maximizing quantity? What is the firm's total cost at the profit-maximizing quantity? What is the firm's maximum profit?Explanation / Answer
a) It is a Perfectly competitive firm (MR is a straight line parellel to X axis)
b) Its total revenue will change by $ 40 which is MR curve.
c) It is 5 units where MR = MC
d) At 5 units TR = 5 multiplied by 40 equal to $ 200.
e) Firm's Average total cost is $ 30
f) Firm's total cost at profit maximizing level fo output is $ 30 multiplied by 5 (equilibrium quantity) equal to $ 150
g) Firm's maximum profit is TR - TC
TR = 200
TC = 150
Profit 200 - 150 = $ 50
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