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A firm has no fixed costs and the following total cost schedule:
Output
Total Cost
1
60
2
68
3
78
4
96
5
120
6
156
7
196
a. What are the average total cost, average variable cost, and marginal cost for these output levels?
b. Plot these cost curves on the same graph.
c. If the firm is a price taker and the price of its output is 36, how much output does the firm produce? What are its economic profits? Describe how these profits can be seen in your figure from part b.
d. Assuming all firms in the industry have these identical costs, the market is competitive (i.e. there is free entry and exit), and this is a constant-cost industry, what is the long-run supply curve for the industry? (Your answer may be in the form of an equation or a graph.)
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