Assume that the cost data in the top table of the next column are purely competi

Question

Assume that the cost data in the top table of the next column are purely competitive producer Total Product Average Fived Cost Average Variable Cost Average Total Cost Marginal Cost 0 1 $ 60,000 $45.00 105.00 $45 2 30,00 42.50 72.50 40 3 20.00 40.00 60.00 35 4 15.00 37.50 52.50 30 5 12.00 37.00 49.00 35 6 10.00 37.50 47.50 40 7 8.57 38.57 47.14 45 8 7.50 40.63 48.13 55 9 6.67 43.33 50.00 65 10 6.00 46.50 52.50 75 assuming product is $32.will this firm produce in the short run, if the following conditions prevail profit/loss maximizing and economic profit/loss will the firm realize per unit output?

Explanation / Answer

No, because $32 is always less than AVC. If it did produce, its output would be 4—found by expanding output until MR no longer exceeds MC. By producing 4 units, it would lose = [ 4* ($32 - $52.50)] = $82 . By Not producing, it would lose only its total fixed cost of $60.

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