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Perfect Competition - Practice Problems - Introduction to Economics

Y TC FC VC AFC AVC ATC MC

0 6.50

1 9.50

2 10.50

3 11.50

4 12.50

5 13.50

6 14.50

7 18.00

8 22.00

9 26.50

10 31.50

Assume this is a perfectly competitive market.

Answer the following questions and explain your answers.

1. Complete the table

2. Assume that the ongoing market price is $3.50. What is the profit-maximizing

level of output for this firm?

3. Assume that the ongoing market price is $3.50. What profit, or loss, is this

company experiencing?

4. What would happen with the number of firms in this market if the ongoing

market price is $3.00?

5. What would be the economic profit, or loss, for this firm if the fixed cost

increases by $1.50 and the market price remains at $3.50?

6. What is the long-run equilibrium price for this company?

7. What is the shut-down price for this company?

ATC i=7 D=AR=MR .5. .rs. Price, Revenue, Cost per Unit {dollars} (:5) Price, Revenue, Cost per Unit (dollars) 0:2- Price, Revenue, Cost per Unit (dollars) 03 '2. 16 '16 Quantity of . Quantity of - Quantity of \"GORE A Output per Day ue 3 Output per Day at-IFS C' Output per Day - {thousands} (thousands) {thousands} Assume this is a perfectly competitive market. Answer the following questions show your answers in the graph. In Figure A: In Figure B: 1. What is the prot-maximizing level of output for this rm? 1. What is the xed cost for this rm? 2. What prot. or loss. is this company experiencing? 2. What prot. or loss. is this company experiencing? 3. What is the long-run equilibrium price for this company? In Figure C: 1. What is the prot-maximizing level of output for this rm? 2. What prot. or loss. is this company experiencing