Show work:
The graph on the left shows the short-run marginal cost curve for a typical firm selling in a perfectly competitive industry. The graph on the right shows current industry demand and supply.
Question 1: What is the marginal revenue that this perfectly competitive firm will earn on its 60th unit of output?
Question 2: What level of output should this firm produce in order to maximize profit or minimize losses?
Question 3: Given your answer to question (b) above, assume that ATC at that level of output is $10. What are the firm’s profits?
Question 4: Now assume that the firm produces 100 units of output and at that level of output ATC = $11. How many firms in total will there be in this market?
Question 5: Finally, assume the firm produces 100 units of output and at that level of output its ATC are $13 but its AVC are $11. What should the firm do and why?