4:50 QUESTION 3 - [25 marks @ 5 each part] Chapter 13 & 14 Market for apple pies in the city of Ectenia is competitive and has the following demand schedule: Price Quantity demanded $1 1200 pies 1100 1000 4 900 5 800 6 700 7 600 8 500 9 400 10 300 11 200 12 100 13 0 Each producer in the market has fixed cost of $9 and the following marginal cost: Quantity Marginal Cost $2 3 6 8 10 6 12 a. Make a table that includes Output, Fixed Cost, Variable Cost, Total Cost, Average Total Cost and Marginal Cost for 1 to 6 pies for each producer. Clearly explain how you have calculated each column. (Note: Variable cost is not given and neither is the total cost, however, marginal cost is given that can be used to find the variable cost; make sure to verify the marginal cost from your total cost.) table Fixed Cost Variable Total Cost ATC Cost 9 $2 $11 $11 6 15 7.5 12 21 20 129 7.25 30 39 7.8 9 42 51 8.5 There is fixed cost of nine, so if quantity is zero, total cost would be nine. When quantity is one, marginal cost is two so we add marginal cost to previous total cost which was 9, then we get a total cost of 11. Similarly, we add marginal cost of 4 to 11 and get a total cost of 15. Next, we add 6 and get 21. That's how we find total cost for the first six units of production. To calculate average total cost, we divide total cost by quantity. For example, 11 divided by one and we get ATC of 11, 15 divided by 2 and we get ATC of 7.5, and so on. b. If the price of a pie is $8, how many pies will be sold? How many pies each producer will make? How many producers are there? How much profit each producer earn? Show all your work and explain how you found each of the values. c. Is the situation described in (b) a long-run equilibrium? Why or why not? Explain all the conditions for a long run equilibrium and state whether each has met or not in this case. d. Suppose in the long-run, there is a free entry and exit. How much profit does each producer earn in the long-run equilibrium? e. What is the market price and number of pies each producer makes? How many pies are sold? How many producers are operating? Show all your work and explain how you find out the long-run price, quantity and the number of firms. QUESTION [25 marks] Chapter 1cost is not given and neither is the total cost, however, marginal cost is given that can be used to find the variable cost; make sure to verify the marginal cost from your total cost.) table Fixed Cost Variable Total Cost ATC Output Marginal Cost Cost 1 $9 $2 $11 $11 $2 2 9 6 15 7.5 4 3 9 12 21 7 6 4 9 20 29 7.25 8 5 9 30 39 7.8 10 16 42 51 8.5 12 There is fixed cost of nine, so if quantity is zero, total cost would be nine. When quantity is one, marginal cost is two so we add marginal cost to previous total cost which was 9, then we get a total cost of 11. Similarly, we add marginal cost of 4 to 11 and get a total at 21. That's how we find total cost for the