Problems 1-9

Name: Period: Perfect Competition Part 1: True or False-Assume that you and your cousin, Tommy, inherit your uncle's brake pad business. Below is a list of statements made by Tommy. Identify which statements are false and write a statement that corrects his misunderstanding. Assume that your brake pads are sold in a perfectly competitive market. 1. The additional cost of brake pads will initially decrease, then increase as more are produced. 2. We should produce brake pads as long as out average total cost (ATC) is falling. 3. If we increase the price of our brake pads, we will make more profit. Part 2: Graphing Practice- Draw correctly labeled side by side graphs depicting a perfectly competitive market. Part 3: More Graphing Practice- Assume that the market price of brake pads is $40. Use the cost curves below for your firm to answer the questions. Price $60 5. If the price is $40, what is the profit MC maximizing quantity for your firm? $50 ATO 6. Calculate the total cost at the profit $40 maximizing quantity. $30 7. Calculate the profit or loss at the profit $20 maximizing quantity. $10 9 10 11 12 Quantity Micro Problem Set #3- Part 3 Name: Period: Part 4: Review- Answer the following questions. 8. Identify the four parts of MR=D=AR=P 9. What is the Profit-Maximizing Rule