Answer Happy

Question 2: (20 points) The following table shows the total costs for a firm to produce Q units of the good, and the total utility for a consumer to consume Q units of the good, in a perfectly competitive market. Suppose the market price is $12. Quantity Total Cost (TC) Total Utility (TU) 0 $1.00 0 1 $5.00 38.00 2 $10.50 58.00 3 $17.00 73.00 4 $29.00 85.00 5 $50.50 90.00 (a) What is the firm's marginal cost from the 5th unit produced? What is the firm's marginal revenue from the 4th unit produced? How does the firm's marginal revenue change over time? (b) What is the consumer's marginal utility from the 2nd unit purchased? How about from the 3rd unit? (c) Is the firm maximizing its profit if it produces 5 units of good? Why? Should the firm increase or decrease its production then? (d) Is the consumer maximizing her net benefit if she consumes 2 units of the good? Why? Should the consumer increase or decrease her consumption then? (e) In a perfectly competitive market, how many products should the firm produce to maximize its profit? And how many products should the consumer consume to maximize his utility?