Answer to Question #301998 in Microeconomics for Forest

Question

Output. TotalCost Price. AveageVariableCost. AverageTotalCost. MargianlCost. Profit.

0 $1,000 $500 ? ? ? ?

1 $1,200 $500 ? ? ? ?

2 $1,350 $500 ? ? ? ?

3 $1,550 $500 ? ? ? ?

4 $1,900 $500 ? ? ? ?

5 $2,300 $500 ? ? ? ?

6 $2,750 $500 ? ? ? ?

7 $3,250 $500 ? ? ? ?

8 $3,800 $500 ? ? ? ?

9 $4,400 $500 ? ? ? ?

10 $5,150 $500 ? ? ? ?

a. Complete the above table. What is the firm’s fixed cost? How can you tell? Hint: if the firm is not producing output, it still must pay its fixed cost but incurs no variable cost.

b.Graph the cost curves and draw in the price. What is the profit-maximizing price and quantity? How much profit does the firm earn? Show the profit on the graph?

c.Suppose the price rises to $550 a ton. How much output should the firm produce?

d. Think about the market in the long run. If the price remains at $550 a ton, do you think that new firms will enter or exit the market? Why? What effect do you think that will have on price in this market?

Answer 1

$Fixed Cost= 1000$