Question

Assume that a firm in a perfectly competitive industry has the following total cost schedule and can only produce in increments of 50 units as illustrated below:

Output( units )	Total Cost ($)
100	1000
150	1500
200	1800
250	2200
300	2800
350	3800
400	5200

Calculate a marginal cost and an average cost schedule for this firm?

If the prevailing market price is $12 per unit, how many units should be produced and sold if the firm is trying to maximize profits? What are the profits per unit? What is the total profit?

Is the industry in long-run equilibrium at the price?

Answer 1

Output( units ) Total Cost ($) MC Price TR MR ATC Profit Profit per unit 100 1000 12 1200 200 2 150 1500 10 12 1800 12 10 300 2 200 1800 6 12 2400 12 9 600 3 250 2200 8 12 3000 12 8.8 800 3.2 300 2800 12 12 3600 12 9.333333333 800 2.666666667 350 3800 20 12 4200 12 10.85714286 400 1.142857143 400 5200 28 12 4800 12 13 -400 -1

MC=Change in TC/Change in Output

MR=Change in TR/Change in Output

TR=Price*Quantity

ATC=TC/Quantity

Profit=TR-TC

Profit per unit=Profit/Output

The firm should produce where MC=MR=P which is 300 units.
The Profit at that level is 800 and profit per level is 2.67.
No,the industry is not in long-run equilibrium at the price.