Question

Total Product	Total Fixed Cost	Total Variable Cost
0	$150	$   0
1	150	50
2	150	75
3	150	105
4	150	145
5	150	200
6	150	270
7	150	360
8	150	475
9	150	620
10	150	800

Refer to the accompanying cost table. If a competitive firm faced with these costs finds that it can sell its product at $60 per unit, it will

Multiple Choice- SHOW WORK

• produce 6 units and incur a loss of $30.

• produce 7 units and realize a profit of $32.

• produce 5 units and incur a loss of $50.

• close down in the short run.

Answer 1

Answer
MC(n)=VC(n)-VC(n-1)
MC(n)=marginal cost of n th unit
VC(n)=variable cost of n units of output
MC(1)=50-0=50
MC(2)=75-50=25
MC(3)=105-75=30
MC(4)=145-105=40
MC(5)=200-145=55
MC(6)=270-200=70 and so on
P=60
The firm produces at MC=P or nearest lower MC
Q=5 units P=60
TR=P*Q=5*60=300
TC=FC+VC=150+200=350
Profit=TR-TC=300-350
so it make a loss of $50

Option 3
produce 5 units and incur a loss of $50.