Suppose a competitive firm’s cost information is as shown in the table below. Its total fixed cost is $9.00.
Output | Marginal Cost | Average Variable Cost | Average Total Cost |
0 | |||
1 | $ 8.00 | $8.00 | $17.00 |
2 | 7.00 | 7.50 | 12.00 |
3 | 6.00 | 7.00 | 10.00 |
4 | 5.00 | 6.50 | 8.75 |
5 | 6.00 | 6.40 | 8.20 |
6 | 7.00 | 6.50 | 8.00 |
7 | 8.00 | 6.71 | 8.00 |
8 | 9.00 | 7.00 | 8.13 |
9 | 10.00 | 7.33 | 8.33 |
10 | 11.00 | 7.70 | 8.60 |
Q. Suppose the firm sells its output at a price of $9.10. What is the firm’s marginal revenue (MR)?
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Q. Compare MR to marginal cost (MC) to determine the firm’s profit maximizing (loss-minimizing) output level. Be sure to check whether or not the firm should shut down.
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Q. What is the firm’s per-unit profit (loss) at this output level?
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Q. What is the firm’s total profit (loss) at this output level?
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Q. Repeat parts a. through d. assuming the price has fallen to $7.10.
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