Question

# For the following firm in a competitive market, COSTS REVENUES Quantity Produced Total Cost Marginal Cost...

1. For the following firm in a competitive market,

 COSTS REVENUES Quantity Produced Total Cost Marginal Cost Quantity Demanded Price Total Revenue Marginal Revenue 0 \$0 -- 0 \$80 -- 1 \$50 1 \$80 2 \$102 2 \$80 3 \$157 3 \$80 4 \$217 4 \$80 5 \$285 5 \$80 6 \$365 6 \$80 7 \$465 7 \$80 8 \$585 8 \$80
1. Fill the column for marginal cost, total revenue and marginal revenue.
2. What is interesting about the numbers you find for marginal revenue.
3. Based on profit maximization rule that you learned in Chapter 14 for competitive firms, what is the profit maximizing output? Explain how you found your answer.

1. For the following firm in a competitive market,
1. What is the profit maximizing quantity (approximately) when the market price is 8? How did you find it?
2. What will this firm do if the price falls to \$5 in short run and long run?

a.

 Q TC MC Q Price TR MR 0 0 0 80 0 1 50 50 1 80 80 80 2 102 52 2 80 160 80 3 157 55 3 80 240 80 4 217 60 4 80 320 80 5 285 68 5 80 400 80 6 365 80 6 80 480 80 7 465 100 7 80 560 80 8 580 115 8 80 640 80

MC=change in TC/change in Q

TR=price*Q

MR=change in TR/change in Q

b.What is interesting about the numbers you find for marginal revenue.

it is equal to the price. when a firm is a price taker, MR=price.

MR is extra revenue generated by a firm with the selling of one more extra unit. because the price is the same at every level of output MR also will be same.

c.Based on profit maximization rule that you learned in Chapter 14 for competitive firms, what is the profit maximizing output? Explain how you found your answer.

Ans: 6 units

Explanation: firm maximizes its profit where MR equals MC. here at Q=6, MR equals MC.