Reference no: EM13128862

Assume the following cost data are for a purely competitive producer:

 

Total Product	Average fixed cost	Average variable cost	Average total cost	Marginal cost
0				$45
1	$60.00	$45.00	$105.00	40
2	30.00	42.50	72.50	35
3	20.00	40.00	60.00	30
4	15.00	37.50	52.50	35
5	12.00	37.00	49.00	40
6	10.00	37.50	47.50	45
7	8.57	38.57	47.14	55
8	7.50	40.63	48.13	65
9	6.67	43.33	50.00	75
10	6.00	46.50	52.50

a. At a product price of $56, will this firm produce in the short run? If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output?  What economic profit or loss will the firm realize per unit of output?

b. Answer the questions of 4a assuming product price is $41.

c. Answer the questions of 4a assuming product price is $32.

d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).

(1) Price	(2) Quantity supplied, single firm	(3) Profit (+) or loss (l)	(4) Quantity supplied, 1500 firms
$26		$
32
38
41
46
56
66

e. Now assume there are 1500 identical firms in this competitive industry; that is, there are 1500 firms, each of which has the same cost data shown in the table. Complete the industry supply schedule.

f. Suppose the market demand data for the product are as follows:

Price	Total quantity demanded
$26	17,000
38	15,000
38	13,500
41	12,000
46	10,500
56	9,500
66	8,000

What will be the equilibrium price? What will be the equilibrium output for the industry? For each firm? What will profit or loss be per unit? Per firm? Will this industry expand or contract in the long run?