Question

Cost figures for a hypothetical firm are given in the following table. Use them for the exercises

below. The firm is selling in a perfectly competitive market.

a. Fill in the blank columns.

b. What is the minimum price needed by the firm to break even?

c. What is the shutdown price?

d. At a price of $40, what output level would the firm produce? What would its profits be?

Answer 1

b)

$$Q=\frac {FC}{p-AVC}$$ $$3=\frac {50}{p-27}$$ $$p=43.7$$

c)

$$5=\frac {50}{p-34}$$ $$p=44$$

d) if p=40, then Q=4

$$Profit=TR-TC$$ $$TR=pQ=40\times4=160$$ $$Profit=160-170=-10$$