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Homework answers / question archive / Wonder Juice Company sells its output in a perfectly competitive market
Wonder Juice Company sells its output in a perfectly competitive market. The firm's total cost function is given in the following table:
| OUTPUT (UNITS) | TOTAL COST ($) |
|---|---|
| 0 | 50 |
| 10 | 120 |
| 20 | 170 |
| 30 | 210 |
| 40 | 260 |
| 50 | 330 |
| 60 | 430 |
The total cost includes a normal return on the labor services and the capital the owner has invested in the firm. The current market price is $7 per unit for juice.
a) Calculate the (i) marginal cost and the (ii) average total cost schedule for the firm.
b) What is the firm's profit maximizing output levels? What is the total profit?
c) Is the industry in long-run equilibrium at this price? Justify your answer.
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