Assume that a firm in a perfectly competitive industry faces a prevailing market price of $75 and has the following total cost schedule: Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140 TC: 300, 700, 1000, 1900, 2900, 4400, 6900, 10000, 15000 TR: Profit/Loss: MC: MR: Complete the schedule above.
Question
Assume that a firm in a perfectly competitive industry faces a prevailing market price of $75 and has the following total cost schedule:
Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140
TC: 300, 700, 1000, 1900, 2900, 4400, 6900, 10000, 15000
TR:
Profit/Loss:
MC:
MR:
Complete the schedule above.
Solution
Sure, let's complete the schedule step by step.
- Total Revenue (TR): Total revenue is calculated as the quantity of goods sold multiplied by the price of the goods. In this case, the price is 75 to get the total revenue.
Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140 TR: 0, 1500, 3000, 4500, 6000, 7500, 9000, 9750, 10500
- Profit/Loss: Profit or loss is calculated as total revenue minus total cost. So, we subtract the total cost from the total revenue for each quantity.
Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140 Profit/Loss: -300, 800, 2000, 2600, 3100, 3100, 2100, -250, -4500
- Marginal Cost (MC): Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It is calculated as the difference in total cost divided by the difference in quantity.
Quantity: 20, 40, 60, 80, 100, 120, 130, 140 MC: (700-300)/20=20, (1000-700)/20=15, (1900-1000)/20=45, (2900-1900)/20=50, (4400-2900)/20=75, (6900-4400)/20=125, (10000-6900)/10=310, (15000-10000)/10=500
- Marginal Revenue (MR): In a perfectly competitive market, the marginal revenue is equal to the price of the good, which is $75 in this case.
Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140 MR: 75, 75, 75, 75, 75, 75, 75, 75, 75
So, the completed schedule is:
Quantity: 0, 20, 40, 60, 80, 100, 120, 130, 140 TC: 300, 700, 1000, 1900, 2900, 4400, 6900, 10000, 15000 TR: 0, 1500, 3000, 4500, 6000, 7500, 9000, 9750, 10500 Profit/Loss: -300, 800, 2000, 2600, 3100, 3100, 2100, -250, -4500 MC: -, 20, 15, 45, 50, 75, 125, 310, 500 MR: 75, 75, 75, 75, 75, 75, 75, 75, 75
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