A firm in a competitive market has fixed costs of $3 and the following structure of average total cost:
|
Output
|
Average Total Cost
|
|
0
|
--
|
|
1
|
$10
|
|
2
|
$8
|
|
3
|
$7
|
|
4
|
$8
|
|
5
|
$10
|
- Find the marginal cost of producing each unit of output. Your answer should consist of five numbers, one for output = 1, one for output = 2, one for output = 3, one for output = 4, and one for output = 5.
- If the market price is $10, what is the firm's profit maximizing level of output? Explain.
- What are the firm's profits at the profit-maximizing output level? Explain.