Manufacturing Operating Cost of A Competitive Industry

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Question Description

Question 1. The table shows the firm’s cost schedule a manufacturer operating in a perfectly competitive industry.

Quantity (cases) Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 $0 $76
1 30 106
2 50
3 134
4 140
5 160
6 114
7 150
8 190
9 316

a. Complete the table by filling in the blank cells. [2 marks]

b. If the market price is $40. What is the profit-maximizing or loss-minimizing level of output? [1 mark]

c. Calculate the firm’s profit or loss. [1 mark]

d. Should the firm continue to produce in the short run? Explain. [1 mark]

e. If the firm’s fixed costs were $20 higher what would be the profit-maximizing output level in the short run? [1 mark]

f. Suppose fixed cost remains at $76. If the market price decreases to $20 what is the profit-maximizing or loss-minimizing output? [1 mark]

g. Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer. [2 marks]

h. Suppose the fixed cost remains at $76. What is the firm’s the shut-down price? [1 mark]

i. Suppose the fixed cost remains at $76. What is the firm’s break-even price? [1 mark]

 

Question 2. Figure below shows the cost and demand curves for a monopolist.

  1. The profit-maximizing output and price for the monopolist are? [1 mark]
  1. The monopolist’s total cost is? [1 mark]
  1. The monopolist earns a profit/loss of? [1 mark]
  1. What is the dollar amount of the consumer surplus? [1 mark]

  1. If was able to engage in Perfect Price Discrimination, what price who be charged for the last unit sold? [1 mark]
  1. What is the value of the deadweight loss resulting from part (e)? [1 mark]
  1. If this industry were organized as a perfectly competitive industry, the market output and market price would be? [1 mark]
  1. What is the dollar amount of the consumer surplus which results from part (g)? [1 mark]

Question 3. The table below shows a company’s cost data.

  1. Over which range of output does experience economies of scale? [2 marks]
  1. What is the minimum efficient scale of production? [1 mark]
Quantity Long-Run Average Cost
100 $40
200 35
300 30
400 30
500 35