ECON10004 Lecture Notes - Lecture 1: Demand Curve, Marginal Revenue, Sunk Costs
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Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
Output (Q) | Total Cost |
0 | 25 |
1 | 50 |
2 | 100 |
3 | 120 |
4 | 155 |
5 | 190 |
6 | 250 |
7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?