ECO 1104 Chapter Notes - Chapter 12: Fixed Cost, Marginal Cost, Marginal Product
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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?
Use the information in the table to calculate total revenue, marginal revenue, and marginal cost. Indicate the profit-maximizing level of output. If the price was $3 and fixed costs were $5, what would variable costs be? At what level of output would the firm produce?
Output |
Price($) |
Total cost |
1 |
5 |
10 |
2 |
5 |
12 |
3 |
5 |
15 |
4 |
5 |
19 |
5 |
5 |
24 |
6 |
5 |
30 |
7 |
5 |
45 |