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Homework answers / question archive / Q TC 12 1 2 14 3 30 4 50 20 Suppose a firm is a price taker, and the market price of a unit is $15
Q TC 12 1 2 14 3 30 4 50 20
Suppose a firm is a price taker, and the market price of a unit is $15. How much will the firm produce? What are the firms' profits? What is the breakeven price? What is the shutdown price?
Table
| Q | TC TVC | MC |
| 0 | 8 - | - |
| 1 | 12 4 | 4 |
| 2 | 14 6 | 2 |
| 3 | 20. 12 | 6 |
| 4 | 30. 22 | 10 |
| 5 | 50. 42 | 20 |
In Perfect Competition, P >= MC
So P = 15
So produce 4 units
Profits = TR-TC
= 4*15 - 30
= 60-30
= 30
breakeven price , where profits are zero
Where ATC = MC
So Min ATC
When ATC = 20/3 = $ 6.667
Shutdown price, where AVC = MC
Min of AVC,
When Q= 2 , AVC = TVC/Q = 6/2= $ 3
