Question: The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the
The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the firm's total fixed cost (TFC) is RM4.
| Output (Units) | Total Revenue (RM) | Average Cost (RM) | Total Cost (RM) | Marginal Cost (RM) | Marginal Revenue (RM) |
| 1 | 8.0 | ||||
| 2 | 5.5 | ||||
| 3 | 4.0 | ||||
| 4 | 3.5 | ||||
| 5 | 3.8 | ||||
| 6 | 4.5 | ||||
| 7 | 6.0 |
- Fill in the values for total revenue (TR), total cost (TC) and marginal cost (MC) in the column provided.
- Determine the profit maximizing output.
- Show the equilibrium of the firm in a diagram.
- If the average revenue falls to RM3 per unit, calculate the firm's new profit or loss at the equilibrium.
- Based on your answer in part (d), should the firm continue or stop the production? Justify.
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