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

Economics Aug 07, 2020

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?

Expert Solution

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

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