Question

Reproduce this table in your answer. Fill in the empty spaces.

Q	P	TR	AR=D	MR	TC	AC	MC=S
0	12		0		$3
1	11				$4
2	10				$4.50
3	9				$5.50
4	8				$7.50
5	7				$10.50
6	6				$15.50
7	5				$24
8	4				$36
9	3				$52
10	2				$70

b) Is this firm a perfectly competitive firm or not? How can you tell?

c)     Using the averages and marginals, find the profit maximizing level of output. What is the profit

        maximizing price? Using the appropriate technique, calculate total profit.

Answer 1

A . Please find table for missing values

TR = P * Q

AR = TR / Q

MR = Change in TR / Change in Q

AC = TC / Q

MC = Change in TC / Change in Q

Q	P	TR	AR=D	MR	TC	AC	MC=S
0	12	0	0	0	3	3	3
1	11	11	11	11	4	4	1
2	10	20	10	9	4.5	2.25	0.5
3	9	27	9	7	5.5	1.83	1
4	8	32	8	5	7.5	1.88	2
5	7	35	7	3	10.5	2.1	3
6	6	36	6	1	15.5	2.58	5
7	5	35	5	-1	24	3.43	8.5
8	4	32	4	-3	36	4.5	12
9	3	27	3	-5	52	5.78	16
10	2	20	2	-7	70	7	18

B Firm is perfectly competitive firm or not

- This firm is not perfectly competitive

- For perfectly competitive firm MR = AR = Price, here all this 3 variables are different thus, this firm is not perfectly competitive firm

C Profit maximizing level of output & Price

- Profit maximizing condition is MR = MC

- At this point Q = 5 and P = 7

Profit = TR - TC

At this point TR = 35 , TC = 10.5

Thus profit = 35 - 10.5 = $24.5