Answer to Question #230339 in Microeconomics for Musawwir

Question

Q.3 A firm uses Labour (L) and Capital (K) to produce commodity (Y). The quantities of the inputs and

outputs are shown in the table below.

L 0 1 2 3 4 5 6 7 8 9 10

K 90 90 90 90 90 90 90 90 90 90 90

Y 0 100 250 420 560 675 760 820 860 885 900

c. Does the average variable cost cuts the marginal cost at the minimum point of the marginal cost? Why

is this always the case? What is the relationship between the marginal cost and average variable cost in

the second stage of production.

d. What are the most critical assumptions used to define a perfectly competitive market. How do these

assumptions relate to the determination of short run equilibrium of the firm in a perfectly competitive

market.

e. Using the data given in this question, determine the short run supply curve of the firm. If there are 15

identical firms in the market, what will be the market supply?

Answer 1

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