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Question: Consider the following cost information for a firm that operates in a perfectly competitive market. Labor is a variable input.
Q (quantity of output)
Total cost ($)
0
3
2
5
4
9
6
15
8
23
10
33
12
45
(1) Calculate the marginal cost for each entry of the quantity in the above table, and using the marginal cost you computed, find the quantity of output that the firm should produce in the short run. The current price of the output is $4.
(2) In the long run, will the price rise or fall from the current level at $4? Explain the reason.
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