Question

Peter's Tattoos is a tattooing business in a perfectly competitive market in Duluth. The table shows Peter's total costs. In the long​ run, what is the price of a tattoo and how many tattoos does Peter sell an​ hour? What is Peter's economic profit in the long​ run?

In​ long-run equilibrium, the price of a tattoo is ​$_____

In​ long-run equilibrium, Peter sells ____ tattoos an hour.

In​ long-run equilibrium, Peter's economic profit is ​$_____an hour.

Quantity (tattoos per hour)    Total cost (dollars per hour)

0 30

1 120

2 180

3 210

4 270

5 360

6 480

Answer 1

Q	TC	MC	VC	FC	AVC	ATC
0	30		0	30
1	120	90	90	30	90	120
2	180	60	150	30	75	90
3	210	30	180	30	60	70
4	270	60	240	30	60	67.5
5	360	90	330	30	66	72
6	480	120	450	30	75	80

FC=30

VC=TC-FC

MC=change in TC

AVC=VC/Q

ATC=TC/Q

The perfectly competitive firm sets p=mc and only produces when the price is above its minimum AVC in the short run

In the long run, the price = Minimum ATC and it breaks even and earns zero profit

In​ long-run equilibrium, the price of a tattoo is ​$67.5

In​ long-run equilibrium, Peter sells 4 tattoos an hour.

In​ long-run equilibrium, Peter's economic profit is ​$0 an hour.