Question

Quantity	TC	Price of	TR	ATC	AVC	MC	MR	MR-MC	Profit	change in
		good								profit
0	10	5	0
1	15	5	5	15	5	5	5
2	18	5	10	9	4	3	5
3	20	5	15	6.67	3.33	2	5
4	21	5	20	5.25	2.75	1	5
5	23	5	25	4.6	2.6	2	5
6	26	5	30	4.33	2.67	3	5
7	30	5	35	4.29	2.86	4	5
8	35	5	40	4.38	3.13	5	5
9	41	5	45	4.56	3.44	6	5
10	48	5	50	4.8	3.8	7	5
11	56	5	55	5.09	4.18	8	5

This is a firm in a perfectly competitive market. The selling price is $5.

Fill in the table

At what price will you be minimizing losses?

There are 2 ways of calculating the change in total profits. List and explain what information you would use.

Answer 1

Fill in the table

Q	TC	Price	TR	ATC	AVC	MC	MR	MR-MC	profit	change in profit
0	10	5	0						-10
1	15	5	5	15.00	5	5	5	0	-10	0
2	18	5	10	9.00	4	3	5	2	-8	2
3	20	5	15	6.67	3.33	2	5	3	-5	3
4	21	5	20	5.25	2.75	1	5	4	-1	4
5	23	5	25	4.60	2.6	2	5	3	2	3
6	26	5	30	4.33	2.67	3	5	2	4	2
7	30	5	35	4.29	2.86	4	5	1	5	1
8	35	5	40	4.38	3.13	5	5	0	5	0
9	41	5	45	4.56	3.44	6	5	-1	4	-1
10	48	5	50	4.80	3.8	7	5	-2	2	-2
11	56	5	55	5.09	4.18	8	5	-3	-1	-3

profit=TR-TC

change in profit=(profit of current unit-profit of previous unit

At what price will you be minimizing losses?

2.6

Explanation:

minimum AVC is a shutdown price. below that price firm will not produce. and if produce will not minimize losses. to minimize losses firm will produce any price above 2.6

There are 2 ways of calculating the change in total profits. List and explain what information you would use.

The following are the two methods.

1. MR-MC

2. profit of current unit-profit of the previous unit.

to calculate the first method we need marginal revenue and marginal cost.

MR=change in TR/change Q

MC=change in TC/change in Q

for second method we need profit .

profit=TR-TC

TR=price*quantity

TC=ATC*Q