Question

Perfect Competition:

The Copy Center specializes in high-volume printing and color copying for small businesses. This is a fiercely competitive market. The following relation exists between output and total production costs:

Total Output	Total Cost	Marginal Cost
0	500
10,000	3,500
20,000	7,500
30,000	12,500
40,000	18,500
50,000	25,500
60,000	33,500
70,000	45,000

A.	Construct a table showing the marginal Cost of production.
B.	What is the minimum price necessary for the company to supply ten thousand copies?
C.	How many copies would the company supply at industry prices of $5,500 and $7,000 per ten thousand?

Answer 1

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Perfect competition equilibrium condition for a firm is

P=MC

where

P= price

MC = marginal cost

Total output	Total cost	Marginal cost
0	500
10,000	3,500	3,000
20,000	7,500	4,000
30,000	12,500	5,000
40,000	18,500	6,000
50,000	25,500	7,000
60,000	33,500	8,000
70,000	45,000	11,500

(b) So for a perfectly competitive firm price should equal to marginal cost

marginal cost at 10,000 units is 3,000

so the price should be 3,000 to supply 10,000 units

(c)At price, $5,500 per ten thousand copies firm will supply 30,000 units of output because here price is lower than marginal cost (at 40,000 units output firm's MC is 6,000 so the firm should not produce at price equals to $5,500)

similarly at price $7,000 per then thousand firm will supply 50,000 units of output (at 50,000 units of output MC is $7,000)