Compute product equilibrium price, output and profit.
Suppose a single company in a purely competitive company has variable costs as indicated in the subsequent table in column 2. Complete the table and answer the questions.
|
(1) Total product
|
(2)
Total var. cost
|
(3) Total cost
|
(4)AFC
|
(5) AVC
|
(6) ATC
|
(7) MC
|
|
0
|
$ 0
|
$ 40
|
$_____
|
$_____
|
$_____
|
|
|
1
|
55
|
_____
|
_____
|
_____
|
_____
|
$_____
|
|
2
|
75
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
3
|
90
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
4
|
110
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
5
|
135
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
6
|
170
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
7
|
220
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
8
|
290
|
_____
|
_____
|
_____
|
_____
|
_____
|
a) At a product price of $52, will this company capable to produce in the short run? Explain. Illustrate what will its profit or loss is?
b) At a product price of $28, will this company capable to produce in the short run? Explain. Illustrate what will its profit or loss is?
c) At a product price of $22, will this company capable to produce in the short run? Explain. Illustrate what will its profit or loss is?
d) Complete the subsequent short-run supply schedule for this company.
|
Product
|
Quantity
|
Profit (+)
|
|
price
|
supplied
|
or loss (-)
|
|
$72
|
_____
|
_____
|
|
52
|
_____
|
_____
|
|
45
|
_____
|
_____
|
|
28
|
_____
|
_____
|
|
22
|
_____
|
_____
|
|
15
|
_____
|
_____
|
Suppose there are 500 identical companies in this company, which they have identical cost data as the company above, and which the company demand schedule is as follows:
|
Price
|
Quantity demanded
|
|
$72
|
2500
|
|
52
|
3500
|
|
45
|
4000
|
|
28
|
5200
|
|
22
|
5900
|
|
15
|
6700
|
e)Illustrate what will the equilibrium price be?
f)Illustrate what will the equilibrium output for each company be?
g)Illustrate what will profit or loss be per unit?
h)Illustrate what will profit or loss be per company?