Question

1A)

Exhibit 8-1 Quantity and total revenue data for a firm

Quantity	Total Revenue
0	$    0
1	62
2	124
3	186

Exhibit 8-1 indicates that this firm is operating in which type of market structure?

	a.	Nonhomogeneous.
	b.	Perfect competition.
	c.	Price-maker.
	d.	Unprofitable.

1B)

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

	a.	No, because the marginal cost of producing the last unit is the same as the marginal revenue.
	b.	Yes, because average variable costs are always less than average total costs.
	c.	No, the previous level of output was the most efficient because it had the lowest average total cost.
	d.	Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.
	e.	No, average total costs have increased which means the company is not minimizing losses.

Answer 1

8-1) I'm this structure P when Q= 1 is 62, P when Q is 2 is 124/2= 62 and P when Q is 3 is 186/3= 62 which tells Price is constant. Therefore, it's a perfect competition.

Therefore (b) is the answer.

1B) Yes, because in the previous case though the average cost is less, it doesn't suck in profits and it MC is shifted to MR, profit can be created with the production of additional units all in all.

Therefore (d) is the answer