Assume that a firm can produce either Product A, or Product B, or Product C with the resources it currently employs. These resources cost the firm a total of $50 per week. Also assume that the firm will produce only one product at a time; that is, all A, all B, or all C. The market prices of the products and the quantities of the products that can be produced per week are in the table below. Compute the firm's profits and add them to the table. Write your responses to the last two columns and the table on a sheet of paper to assist you. Then answer the questions below.

1. Which product should the firm produce?
a. Product a
b. Product b
c. Product c
d. Don't know
2. If the price of A rose to $8, what product should the firm produce?
a. Product a
b. Product b
c. Product c
d. Don't know
3. If the firm were producing Product A and selling it at a price of $8, what would tend to happen to the number of firms producing Product A?
a. The number of firms would increase
b. The number of firms would decrease
c. The number of firms would stay the same
d. Don't know

Transcribed Image Text:

TOTAL ECONOMIC PRICE PRODUCT OUTPUT REVENUE PROFIT $7.00 A $4.50 B 10 240 $0.25