Answer Happy

2. At the current output level, Q. a perfectly competitive firm finds itself with the following: Output: Q = 5,000 Total variable cost: TVCQ) = $2,500 Market price: P= $1.00 Total fixed cost: TFC = $2,000 Marginal cost: MC(QI) = $1.25 With increase in output, marginal cost would rise. To maximize its profit, should the firm produce more, less, or the same amount? Explain your answer using the figure with the MC, AVC, and MR curves of the firm. (5 points)
1. The demand schedule facing a perfectly competitive firm and the total-variable-cost schedule of the firm are given as follows: TR MR e TVC(O) AVCO), TL MCO) P SO Jalu o 0 $300 300 300 380 6002 300 720 900 3 300 1,025 1200 4 300 1,300 1500 300 1,550 1800 300 1,780 7 300 1,995 2400 8 300 2,200 2700 300 2,400 3000 10 300 2,605 3500 11 300 2,820 300 3,050 300 3,300 300 3,575 300 3,880 300 300 300 300 300 300 300 3002 300 טטו2 ola 380 340 305 275 250 a 30 a 15 205 200 205 215 230 256 275 305 380 360 341.67 325 310 296.67 285 275 266.67 260.5 256.4 254.2 253.8+ 255.36 258.67 3600 12 3900 13 4200 14 +500 15 390 300 300 300 300 (1) (2) (3) Complete the table. (5 points) What is the profit-maximizing output level? (5 points) Suppose that the firm produces the profit-maximizing output level and the total fixed cost is $300: TFC = 300. What is the total profit? (5 points) Suppose that the total fixed cost is $2,000: TFC2 2,000. What is the total profit when the firm produces the profit-maximizing output level? (5 points) Suppose that the price is now $250. What is the profit-maximizing output level? (5 points) (5)