Table 7.1QuantityTotal Cost(dollars)Variable Cost(dollars) 0$1000 $0100 1360 360200 1560 560300 1960 960400 27601760500 40003000600 58004800 Table 7.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 7.1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm’s profit-maximising output level?Group of answer choicesIt must fall.It must rise to offset the increased cost.It will remain the same.The firm will shut down.
Question
Table 7.1QuantityTotal Cost(dollars)Variable Cost(dollars) 00100 1360 360200 1560 560300 1960 960400 27601760500 40003000600 58004800 Table 7.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.Refer to Table 7.1. Suppose the fixed cost of production rises by 8. What happens to the firm’s profit-maximising output level?Group of answer choicesIt must fall.It must rise to offset the increased cost.It will remain the same.The firm will shut down.
Solution
The profit-maximizing output level is determined by the point where marginal cost equals marginal revenue. In this case, the price per unit is given as $8, which is also the marginal revenue for a perfectly competitive firm.
To find the marginal cost, we need to calculate the change in total cost for each additional 100 units of output. From the table, we can see that the marginal cost for the first 100 units is 200, for the third 100 units is 800, and for the fifth 100 units is $1200.
Given the price of 800 per 100 units, the firm will maximize profit by producing up to the point where marginal cost is equal to or less than marginal revenue. This occurs at the production level of 300 units, where marginal cost is 4 per unit).
If the fixed cost of production rises by $500, this does not affect the marginal cost of production, which is based on variable costs only. Therefore, the profit-maximizing output level will remain the same.
So, the answer is: It will remain the same.
Similar Questions
Use the following table to answer the next question. The table shows the total costs associated with varying levels of output produced by a perfectly competitive firm. Output Total Cost0 $1,4001 1,6002 2,0003 2,6004 3,5005 4,800 If the product sells for $800 a unit, the firm's profit-maximizing output isMultiple Choice2.3.4.
Given the data in the table below, what is the short-run profit-maximizing level of output for the perfectly competitive firm? Output Total Revenue Total Cost1 $4 $22 8 33 12 64 16 105 20 15Multiple Choice2 units3 units4 units5 units
. Given the following data for a perfectly competitive firm, what is the amount of profit the firm will make atthe profit maximizing output? AR = $100 and TC = 1,000 + 125Q - .5Q2 where Q = units produced permonthA) none – the firm would shut downB) $1,312.50C) $2,548.63D) –$1,425.86E) –$2,351.27
Consider a firm operating in a competitive market in the short run. The table below shows the firm’s total cost of production at various output levels. At a market price of $10, how many units of output should the firm supply? Output (q) FC ($) VC ($)0 10 01 10 22 10 63 10 104 10 155 10 216 10 307 10 40
Table 9.3. Quantity Price(dollars)Total Revenue(dollars)Total Variable Cost(dollars)Total Cost(dollars) 0 21 0 050 1 20 20 16 66 2 19 38 31 81 3 18 54 45 95 4 17 68 59109 5 16 80 75125 6 15 90 93143 7 14 98112162 8 13104140190 9 12108180230 10 11110230280 Table 9.3 shows the demand and cost schedules for a monopolistically competitive firm.Refer to Table 9.3. What is the best course of action for the firm in the short run? It should not cut its price, but it should increase its sales by advertising. You Answered It should increase its sales by lowering its price. It should shut down. Correct answer It should stay in business because it covers some of its fixed cost.
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.