Question

In: Economics

The table shows total cost and total revenue information for a perfectly (or purely) competitive firm....

The table shows total cost and total revenue information for a perfectly (or purely) competitive firm.

Quantity	Total cost	Total revenue
00	500500	00
11	600600	135135
22	710710	270270
33	830830	405405
44	960960	540540
55	11001100	675675
66	12501250	810810
77	14101410	945945
88	15801580	10801080
99	17601760	12151215
1010	19501950	13501350

Firms earning a loss will sometimes shut down in the short run. What quantity will the firm produce if it shuts down in the short run?

unitsunits

What will the profits be if this firm shuts down?

$

Firms sometimes prefer to minimize losses by continuing to operate in the short run. What quantity will the firm produce to minimizes losses in the short run?

unitsunits

If this firm chooses to operate, what will its profits equal? Enter a negative number for a loss.

$

If the cost and revenue numbers in the table will continue forever (permanently), is it better for this firm to

shut down immediately.

continue to operate indefinitely.

continue to operate in the short run, and exit the market in the long run.

Expert Solution

Quantity	Total cost	Total revenue	Profit	ATC	AVC
0	500500	0	-500500
11	600600	135135	-465465	54600	9100
22	710710	270270	-440440	32305	9555
33	830830	405405	-425425	25176.67	10010
44	960960	540540	-420420	21840	10465
55	11001100	675675	-10325425	200020	190920
66	12501250	810810	-11690440	189412.9	181829.5
77	14101410	945945	-13155465	183135.2	176635.2
88	15801580	10801080	-5000500	179563.4	173875.9
99	17601760	12151215	-5450545	177795.6	172740
1010	19501950	13501350	-6000600	19308.86	18813.32

If a firm earns loss, quantity would be zero

Profits would be the fixed cost = 500500

In short run a firm would produce where AVC is minimum and the quantity is 44

Profit = -$420420

Option 3 It is better to exit in the long run as it would lead to high losses

Rahul Sunny answered 1 year ago

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