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.
The profit-maximizing output and price for the monopolist are? [1 mark]
The monopolist's total cost is? [1 mark]
The monopolist earns a profit/loss of? [1 mark]
What is the dollar amount of the consumer surplus? [1 mark]
If was able to engage in Perfect Price Discrimination, what price who be charged for the last unit sold? [1 mark]
What is the value of the deadweight loss resulting from part (e)? [1 mark]
If this industry were organized as a perfectly competitive industry, the market output and market price would be? [1 mark]
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.
Over which range of output does experience economies of scale? [2 marks]
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