In the accompanying table, you are given information about two firms that compete in a price-taker market. Assume that fixed costs for each firm are $20.

a. Complete the table.

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b. What is the lowest price at which firm A will produce?

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c. How many units of output will it produce at that price? (Assume that it cannot produce fractional units.)

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d. What is the lowest price at which firm B will produce?

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e. How many units of output will it produce?

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f. How many units will firm A produce if the market price is $20?

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g. How many units will firm B produce at the $20 price? (Assume that it cannot produce fractional units.)

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h. If each firm’s total fixed costs are $20 and the price of output is $20, which firm would earn a higher net profit or incur a smaller loss?

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i. How much would that net profit or loss be?

*Asterisk denotes questions for which answers are given in Appendix B.

     

FIRM A				FIRM B
QUANTITY	TOTAL VARIABLE COST	MARGINAL COST	AVERAGE VARIABLE COST	QUANTITY	TOTAL VARIABLE COST	MARGINAL COST	AVERAGE VARIABLE COST
1	$24	—	—	1	$8	—	—
2	30	—	—	2	10	—	—
3	38	—	—	3	16	—	—
4	48	—	—	4	24	—	—
5	62	—	—	5	36	—	—
6	82	—	—	6	56	—	—
7	110	—	—	7	86	—	—