Calculate Average Total Cost
A perfectly Competitive firm is operating at a profit-maximizing level of output, q*. This output level is 500 units.
At this output level, the firm earns a Total Revenue of $3,000. At this output, the firm faces the following costs:
Total Fixed Costs of $1,200
Total Variable Costs of $3,300 and
(A) Solve for the Market Price. PE
= ___
(B) Solve for ATC (average total cost) at an output level of 1,000 units.
ATC= _
(C) Calculate the firm's profit. (Specify if this is positive or negative profit.)
Profit = _____
(D) Should the firm shut down or keep producing in the Short Run?
(E) Graph this, for the firm; indicate the demand curve the firm faces. Also indicate the MC, ATC, and AVC curves. Label q* on the quantity axis. Indicate the value of the ATC & AVC curves (and PE) at the level of output q*. (Label these values on the Price Axis. )
Draw in the Profit Box as well.
