Why invest capital in purely competitive industries with equilibrium margins that are razor thin and entrants that erode quasi profits? Suppose volume is not exceptionally large, why then?
Assume that a firm in a perfectly competitive industry has the following total cost schedule:
a. Calculate a marginal cost and an average cost schedule for the firm.
b. If the prevailing market price is $17 per unit, how many units will be produced and sold? What are profits per unit? What are total profits?
c. Is the industry in long-run equilibrium at this price?