Question
In: Economics
The table above shows a perfectly competitive firm's widget production and cost schedule. Suppose that the prevailing market price is $6.
| Quantity (Q) | Total Cost (TC) | Average Total Cost (ATC) | Marginal Cost (MC) |
| 0 | $9 | -- | -- |
| 1 | $10 | ||
| 2 | $12 | ||
| 3 | $15 | ||
| 4 | $19 | ||
| 5 | $24 | ||
| 6 | $30 | ||
| 7 | $49 |
The table above shows a perfectly competitive firm's widget production and cost schedule. Suppose that the prevailing market price is $6.
(a) Fill in the blanks of the table above.
(b) Find the profit-maximizing quantity using the condition MR = MC.
(c) Calculate the maximum profit using the following formula: Profit =(P − ATC)×Q
Solutions
Expert Solution
(a) Fill in the blanks of the table above.
| Q | TC | ATC | MC |
| 0 | 9 | ||
| 1 | 10 | 10 | 1 |
| 2 | 12 | 6 | 2 |
| 3 | 15 | 5 | 3 |
| 4 | 19 | 4.75 | 4 |
| 5 | 24 | 4.8 | 5 |
| 6 | 30 | 5 | 6 |
| 7 | 49 | 7 | 19 |
ATC=TC/Q
MC= change in TC/change in Q
(b) Find the profit-maximizing quantity using the condition MR = MC.
6 units.
Explanation:
firm maximizes its profit where MR=MC. in perfect competition price=MR. so, at Quantity 6, MR equals MC.
(c) Calculate the maximum profit using the following formula: Profit =(P − ATC)×Q
firm maximizes its profit where MR=MC. here profit maximizing quantity is 6.
Profit =(P − ATC)×Q
=(6-5)*6
=6.
Rahul Sunny answered 3 years agoRelated Solutions
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