Cost of Production
|
Output (Q)
|
SRTC
|
AVC
|
TR
|
|
0
|
350
|
|
|
|
1
|
400
|
|
|
|
2
|
425
|
|
|
|
3
|
465
|
|
|
|
4
|
505
|
|
|
|
5
|
560
|
|
|
|
6
|
635
|
|
|
|
7
|
730
|
|
|
AVC is Average Variable Cost
TR is Total Revenue
SRTC is Short Run Total Cost
SRTC = FC + VC (Total Cost = Fixed Cost + Variable Costs)
Suppose the fixed cost (FC) of production is $350 and Price (P) is $55, complete the table above. (Cut and paste the table into a separate document).
- Suppose you are producing 2 units of output (Q = 2), if you want to produce one extra unit of output (Q = 3), what would be the marginal cost? (Show your work.)
- If the market price is given as $55, how much output will the perfectly competitive firm produce to maximize profits? (Show your work.)
- Calculate the profit or loss. (Show your work.)
- Should the firm always shut down in the short run when it experiences a loss? Explain.