Question
In: Economics
The table below shows the total cost and marginal cost for Chrissy's Costumes, a perfectly competitive...
The table below shows the total cost and marginal cost for Chrissy's Costumes, a perfectly competitive firm producing different quantities of children's costumes. The market price of costumes is $15.00.
Chrissy's Costs of Production
| Quantity (costumes) | Total Cost (dollars) | Marginal Cost (dollars) |
| 100 | $8.00 | $7.50 |
| 200 | 7.50 | 6.50 |
| 300 | 7.00 | 7.00 |
| 400 | 9.00 | 12.00 |
| 500 | 12.00 | 15.00 |
| 600 | 15.00 | 17.00 |
Instructions: Enter your answers as a whole number.
a. If the market price is $15.00 per costume, how many costumes should Chrissy's Costumes make?
costumes
b. If the market price for costumes falls to $12.00 per costume, how many costumes should Chrissy's Costumes make now?
costumes
Solutions
Expert Solution
(A) A perfectly competitive firm produces at P = MC.
The market price is $15
=> P = MC = $15 corresponding to 500 units of output.
Therefore, Chrissy costume should make 500 units of costume at a price of $15.
--------------------------
(B)
A perfectly competitive firm produces at P = MC.
The market price falls from $15 to $12
=> P = MC = $12 corresponding to 400 units of output.
Therefore, Chrissy costume should make 400 units of costume at a price of $12.
--------------------------
Rahul Sunny answered 2 years agoRelated Solutions
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