A purely competitive firm finds that the market price for its product is $30. It has a fixed cost of $100 and a variable cost of $17.50 per unit for the first 50 units and then $37.50 per unit for all successive units. Instructions: Enter your answers rounded to two decimal places. a. Does price equal or exceed average variable cost for the first 50 units? What is the average variable cost for the first 50 units? $ per unit b. Does price equal or exceed average variable cost for the first 100 units? What is the average variable cost for the first 100 units? $ per unit c. What is the marginal cost per unit for the first 50 units? $ per unit The marginal cost for units 51 and higher? $ per unit d. For each of the first 50 units, does MR exceed MC? Is MR > MC for units 51 and higher? e. What output level will yield the largest possible profit for this purely competitive firm? units
Question
A purely competitive firm finds that the market price for its product is 100 and a variable cost of 37.50 per unit for all successive units. Instructions: Enter your answers rounded to two decimal places. a. Does price equal or exceed average variable cost for the first 50 units? What is the average variable cost for the first 50 units? per unit c. What is the marginal cost per unit for the first 50 units? per unit d. For each of the first 50 units, does MR exceed MC? Is MR > MC for units 51 and higher? e. What output level will yield the largest possible profit for this purely competitive firm? units
Solution
a. Does price equal or exceed average variable cost for the first 50 units?
To determine this, we need to calculate the average variable cost (AVC) for the first 50 units.
Variable cost for the first 50 units = 17.50/unit = $875
Average variable cost for the first 50 units = Total variable cost / Number of units Average variable cost for the first 50 units = 17.50 per unit
Since the market price is 17.50, price exceeds average variable cost for the first 50 units.
What is the average variable cost for the first 50 units? $17.50 per unit
b. Does price equal or exceed average variable cost for the first 100 units?
To determine this, we need to calculate the average variable cost (AVC) for the first 100 units.
Variable cost for the first 50 units = 37.50 per unit
Total variable cost for the first 100 units = (50 units * 37.50/unit) Total variable cost for the first 100 units = 1875 = $2750
Average variable cost for the first 100 units = Total variable cost / Number of units Average variable cost for the first 100 units = 27.50 per unit
Since the market price is 27.50, price exceeds average variable cost for the first 100 units.
What is the average variable cost for the first 100 units? $27.50 per unit
c. What is the marginal cost per unit for the first 50 units?
The marginal cost (MC) for the first 50 units is the same as the variable cost per unit for the first 50 units. Marginal cost per unit for the first 50 units = $17.50 per unit
The marginal cost for units 51 and higher?
The marginal cost (MC) for units 51 and higher is the same as the variable cost per unit for those units. Marginal cost for units 51 and higher = $37.50 per unit
d. For each of the first 50 units, does MR exceed MC?
Marginal revenue (MR) is equal to the market price, which is 30) exceeds MC ($17.50).
Is MR > MC for units 51 and higher?
For units 51 and higher, MR (37.50).
e. What output level will yield the largest possible profit for this purely competitive firm?
The firm should produce up to the point where MR equals MC. Since MR exceeds MC for the first 50 units but not for units 51 and higher, the firm should produce 50 units to maximize profit.
Output level that will yield the largest possible profit: 50 units
Similar Questions
When it produces 100 units, a firm’s total variable cost is $300 and its total fixed cost is $2700. What is the average cost?1 point$3$24$27$30
Ted is a producer in the perfectly competitive market for sandwiches. Ted produces his profit-maximising quantity of 55 sandwiches at the market price of $4.00 per sandwich. At this output, his average variable cost is $2.80 per sandwich and his average total cost is $3.10 per sandwich. His minimum average variable cost is $2.70 per sandwich. Select the item from the list provided to make the following statements true. The total variable cost Ted will incur at his profit maximising production level is __________. Ted's average fixed cost at his profit maximising production level is __________. If the market price begins to drop below $4.00 per sandwich, and Ted’s costs remain unchanged, Ted will need to shut down if the market price falls to below __________.
Q10 An industry currently has 100 firms, each of which has fixed cost of $16 and average variable cost as follows: Quantity: 1, 2, 3, 4, 5, 6 Average variable cost: $1, 2, 3, 4, 5, 6 a) Compute a firm's marginal cost and average total cost for each quantity from 1 to 6. b) The equilibrium price is currently $10.How much does each firm produce? What is the total quantity supplied in the market? c) In the long run, firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium,will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. d) Graph the long-run supply curve for this market, with specific numbers on the axes as relevant.
A firm has fixed costs of $400, average total costs of $3 and average variable costs of $2.50. The output of the firm is _____________.
Suppose, at an output of 500 units, a firm’s total cost (TC) is equal to $7,000; and their Average Fixed Cost (AFC) is equal to $1. What is this firm’s average variable cost when they produce 500 units? Group of answer choices 13 10 14 500 6500
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.