Question

In: Economics

The table above shows some of the costs for a perfectly competitive firm. If the price is $160 per unit, how many units of output will the firm produce?

Quantity

Total fixed cost, TFC

(dollars)

Total variable cost, TVC

(dollars)

0

500

0

1

500

100

2

500

180

3

500

220

4

500

300

5

500

390

6

500

500

7

500

640

8

500

800

9

500

1000

10

500

1250

11. The table above shows some of the costs for a perfectly competitive firm. If the price is $160 per unit, how many units of output will the firm produce?

A) 8

B) 9

C) 10

D) more than 10

Solutions

Expert Solution

Option A

8 units

Quantity Total fixed cost, TFC Total variable cost, TVC MC
(dollars) (dollars)
0 500 0
1 500 100 100
2 500 180 80
3 500 220 40
4 500 300 80
5 500 390 90
6 500 500 110
7 500 640 140
8 500 800 160
9 500 1000 200
10 500 1250 250

MC of n the unit=(TC of n units -TC of p units )/(n-p)...............n>p

The firm produces at MC=P and that is equal to 8 units


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