Question

In: Economics

A purely competitive firm finds that the market price for its product is $20.00. It has...

A purely competitive firm finds that the market price for its product is $20.00. It has a fixed cost of $100.00 and a variable cost of $15.00 per unit for the first 50 units and then $25.00 per unit for all successive units.

A. Does price equal or exceed average variable cost for the first 50 units?

What is the average variable cost for the first 50 units?

B. Does price equal or exceed average variable cost for the first 100 units?

What is the average variable cost for the first 100 units?

C. What is the marginal cost per unit for the first 50 units?

What is the marginal cost for units 51 and higher?

D. For each of the first 50 units, does MR exceed MC?

What about for units 51 and higher?

E. What output level will yield the largest possible profit for this purely competitive firm?

Solutions

Expert Solution

Yes Price exceeds average variable cost for the first units since the average variable cost for the first units is dollars per unit and the market price for the product is dollars.

yes price exceeds average variable cost for the first units because the average variable cost for the first units is =

The marginal cost per unit for the first units is

Same the marginal cost per unit for units and higher is

The output level that will yield the largest possible profit for this purely competitive firm is units because anything larger will cause the profits to fall.

Rahul Sunny answered 1 year ago

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