Question

Total Product	Average Fixed Cost	Average Variable Cost	Average Total Cost	Marginal Cost
1	$100.00	$17.00	$117.00	$17
2	50.00	16.00	66.00	15
3	33.33	15.00	48.33	13
4	25.00	14.25	39.25	12
5	20.00	14.00	34.00	13
6	16.67	14.00	30.67	14
7	14.29	15.71	30.00	26
8	12.50	17.50	30.00	30
9	11.11	19.44	30.55	35
10	10.00	21.60	31.60	41
11	9.09	24.00	33.09	48
12	8.33	26.67	35.00	56

The accompanying table gives cost data for a firm that is selling in a purely competitive market. Which of the following tables gives the firm's short-run supply schedule?

Multiple Choice

• Price	Qs
  $50	12
  42	10
  36	8
  32	8
  20	6
  13	0

• Price	Qs
  $50	11
  42	10
  36	9
  32	8
  20	6
  13	5

• Price	Qs
  $50	12
  42	11
  36	9
  32	8
  20	6
  13	5

• Price	Qs
  $50	11
  42	10
  36	9
  32	8
  20	6
  13	0

Answer 1

We know that a perfectly competitive firm maximises it's profit when Price is equal to Marginal cost. At any output level where price is less than Marginal cost the firm will not produce any quantity.

So if we look at the first option

At total product 12 price is less than Marginal cost. So first option is cancelled.

The second option holds really good for each level of output. Holds good means that price is greater than Marginal cost at that respective output level.

Last two options are also don't hold good for the reason discussed regarding 1st option .

So the correct option is the second option .

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