Consider the cost schedule given in the following table and P = $26 for a perfectly...

Consider the cost schedule given in the following table and P = $26 for a perfectly competitive firm:

Output Total Variable Costs Total Costs (STC)

0 $0 $30

1 20 50

2 30 60

3 48 78

4 90 120

5 170 200

Draw three separate graphs using the SATC, AVC, and SMC curves, and on each one indicate (i) the profit maximizing level of output, (ii) the profit/loss per unit, (iii) the total profit/loss, and (iv) whether the firm should stay open or shut down (and why) when:

P = $42

P = $18

P = $12.50

Expert Solution

The formulas used

ATC=TC/Q, MC = Change in TC/Change in Q, MR=P = AR, MR = Change in TR/Change in Q, TR = P*Q, Profits = TR-TC

Rahul Sunny answered 1 year ago

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