mircoeconomics question
- The following table gives short-run and long-run total costs for various levels of output for a perfectly competitive firm:
| Output (Q) | SRTC | AVC | TR |
| 0 | 350 | ||
| 1 | 400 | ||
| 2 | 425 | ||
| 3 | 465 | ||
| 4 | 505 | ||
| 5 | 560 | ||
| 6 | 635 | ||
| 7 | 730 |
Note: AVC is Average Variable Cost
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TR is Total Revenue
SRTC is Short Run Total Cost
SRTC = FC + VC (Total Cost = Fixed Cost + Variable Costs)
Please see background material for additional formulas.
- Suppose the fixed cost (FC) of production is $350 and Price (P) is $55, complete the table above. (Cut and paste the table into a separate document).
- Suppose you are producing 2 units of output (Q = 2), if you want to produce one extra unit of output (Q = 3), what would be the marginal cost? (Show your work.)
- If the market price is given as $55, how much output will the perfectly competitive firm produce to maximize profits? (Show your work.)
- Calculate the profit or loss. (Show your work.)
- Should the firm always shut down in the short run when it experiences a loss? Explain
- provide sources
