Question

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

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

a.   At a product price of $56, will this firm produce in the short run? Why, or why not? If it does produce, what will be the profit‑maximizing or loss‑minimizing output? Explain. What economic profit or loss will the firm realize per unit of output.

Answer 1

Answer : At product price $56 firm will produce in short run because at Total product 8, Total revenue is 448 and Total cost is 385 and profit will be 63 which is maximum at output 8.

Hence firm if produces total product 8 then it will earn highest profit that is 63.

All profits and losses are mentioned below in table.

Below are profits by deducting Total cost from Total revenue.

Total revenue is calculated by multiplying corresponding units with $56 that is Price which is equal to Average revenue and when Average Revenue is multiplied by corresponding units of output, amount is said to be Total revenue.

​​​​​​

Hence concluded that above profit is calculated at each level of output.

Kindly rate for my answer please ? and feel free to ask your doubts.