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Question 1 The table below shows the cost and revenue information of a firm. Output (units)...

Question 1

The table below shows the cost and revenue information of a firm.

Output (units)	Price (RM)	Total Cost (RM)	Total revenue (RM)	Marginal Cost (RM)	Marginal Revenue (RM)
0	14	10
1	14	14
2	14	22
3	14	34
4	14	48
5	14	64
6	14	82

(a) Complete the table above. [9 marks]

(b) Determine the price and output at equilibrium. [6 marks]

(c) Calculate the profit or loss at equilibrium. [4 marks]

(d) Is this firm in the short-run or long-run? Explain your answer. [5 marks]

(e) To what type of market structure does this firm belong? Why do you say so? [6 marks]

Expert Solution

A)

Units	Price (RM)	Total cost	Total revenue	Marginal cost	marginal revenue
0	14	10	0	0	0
1	14	14	14	4	14
2	14	22	28	8	14
3	14	34	42	12	14
4	14	48	56	14	14
5	14	64	70	16	14
6	14	82	84	18	14

B)

Equilibrium position is where MR=MC. It is a position where the firm is making maximum profits.

Thus, at sale of 4 units @14, firm is at equilibrium position.

Price =14

Output = 4 units

C) At equilibrium position

Profit= total revenue-total cost

=56-48

=8

D) since there are no fixed factors in the given firm, firm is in long run. In case both variable and fixed factors are involved, it is the case of short run.

E) Type of market structure is Perfect market competition. As the price is fixed at 14 and firm is not changing the price of the product with the change in demand. If it would have been another market structure firm would be elastic enough in changing the prices of the products.

Do give your feedback!! Happy learning :) :)

ekkarill92 answered 5 months ago

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