Question

1. The table below contains economic cost information for a perfect competitor. Use it to answer the questions that follow. Q, ATC, AVC, and MC = quantity, average total cost, average variable cost, and marginal cost.
   

Q	ATC	AVC	MC
10	100.00	80.00	10
11	95.45	77.27	50
12	93.33	76.67	70
13	92.31	76.92	80
14	91.79	77.50	85
15	91.67	78.33	90
16	91.88	79.38	95
17	92.35	80.59	100
18	93.06	81.94	105
19	93.95	83.42	110
20	95.25	85.25	120

1. What quantity maximizes profit when price = $101?
   
   Q = __
   

2. What is the maximum profit when price = $101?
   
   Maximum profit = ___
   

3. Would the maximum profit increase, decrease, or remain constant in the long run?
   
   The maximum profit would ____________________.
   
   Why?

Would the firm produce output or shut down in the short run when price = $84?

The firm would ________________________.

Explain your logic.

Answer 1

Quantity	Price	ATC	Profit
10	101	100	1
11	101	95.45	5.55
12	101	93.33	7.67
13	101	92.31	8.69
14	101	91.79	9.21
15	101	91.67	9.33
16	101	91.88	9.12
17	101	92.35	8.65
18	101	93.06	7.94
19	101	93.95	7.05
20	101	95.25	5.75

a. Q= 15

b. Maximum profit = $9.33

c. In the long run the maximum profit would decrease.

If the price is $84 the firm would Shut down on the short run as it won't be able to even cover it's costs.