Answer to Question #251999 in Microeconomics for bruhhh

Question

4. The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market. a. Complete the following table for a single firm in the short run.
output| tfc| tvc | tc | Avc | Atc | Mc |
 0      $150  $0   150  -      -    -
1       150   40   190  40    190   40
2       150   100  250  50    125   60
3       150   180  330  60    110   80
4       150   280  430  70    107.5  100
5       150   400  550  80    110   120
6       150   560  710  93.33 118.33  160
7       150   760  910 108.57 130     200
8       150   1000 1150 125   143.75  240
9       150   1300 1450 144.44 161.11 300
10      150   1850 2000 185    200    550
b. Using the information in the table, fill in the following supply schedule for this individual firm under perfect competition and indicate profit (positive or negative) at each output level. (Hint: At each hypothetical price, what is the MR of producing 1 more unit of output? Combine this with the MC of another unit to figure out the quantity supplied.)
PRICE |QUANTITYSUPPLIED| PROFIT
 $ 40        __         ____ 
   70        __         ____
   110       __         ____ 
   140       __         ____ 
   180       __         ____ 
   220       __         ____ 
   260       __         ____ 
   400

Answer 1

The total cost incurred by a firm operating in a market includes fixed costs and variable costs. Fixed costs do not change when there is a change in the quantity of output. Variable costs changes with changes in the quantity of output.

The total revenue of the firm is the sum of payments received from the sale of goods and services. Profit is the difference between total revenue and total cost.

Step 2

The marginal cost curve of a firm in the short run is the marginal cost curve above the minimum point of the average variable costs curve. When the price is less than the average cost, the firm will shut down and therefore the supply will be zero. Here the minimum of the average variable cost curve is $40. Therefore if the price is at least $40, the firm will supply.

The quantity supplied at each price is calculated by comparing the marginal cost and marginal revenue. The marginal revenue at each price is equal to the price. The firm will produce the quantity for which the marginal cost is less than or equal to the marginal revenue.

When the price is $40, the marginal revenue is $40. The marginal cost is $40 for the first unit. Therefore at $40, the firm will supply one unit of the output. Similarly, the quantity supplied at each price level is calculated.

Total revenue is the product of price and quantity. Total cost is the product of average cost and quantity. Therefore the profit can be calculated by multiplying the difference between price and average total cost by the quantity. The profit when the price is $40 is calculated as,

Profit=Total revenue−Total cost

=Price× Quantity− Average total cost× Quantity

=Quantity×(Price−Average total cost)

=1×(40−190)

=−150

Similarly, the profit for other levels of price is calculated.