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

(a) Fill in the blanks of the table above.

(b) Find the profit-maximizing quantity using the condition MR = MC.

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.

firm maximizes its profit where MR=MC. here profit maximizing quantity is 6.

Profit =(P − ATC)×Q

=(6-5)*6

=6.

Rahul Sunny answered 1 year ago

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