Cost-Benefit Analysis – Perfect competition
Use the table below to answer the following questions:
Output Total Cost
a What are variable costs of producing 5 units?
b What is com/economics/short-and-long-run-cost-functions”>average total cost of producing 3 units?
c What is average fixed cost of producing 4 units?
d What is the com/economics/short-and-long-run-cost-functions”>marginal cost of producing the 2nd unit?
e What are fixed costs?
f What is com/economics/short-and-long-run-cost-functions”>average variable cost of producing 1 unit?
State whether the following describes MC(marginal cost), ATC(average com/economics/short-and-long-run-cost-functions”>total cost), AVC(average variable cost), or AFC(average fixed cost) Some statements may describe more than one cost curve
a Cost continuously decline as output rises
b Always lies above the AVC curve
c First declines as quantity increases, but then increases as quantity increases
d Cuts the ATC and AVC at their minimum points
Task 1 Member _________ Suppose your team constructed a list of the following conditions of a perfectly com/economics/competition”>competitive market Circle those that he got correct and fix those that he got wrong
There are many barriers to entry Firms are price makers
Firms’ products are differentiated There is complete information
Firms maximize market share The number of firms is large
Tasks 2 Member ________ Given the marginal cost information below, answer the following questions:
Output Marginal Costs
a The firm can sell a helmet for $34 and the firm is producing 6 helmets Would increasing output increase or decrease profit?
b The firm can sell a helmet for $34 and the firm is producing 4 helmets Would increasing output increase or decrease profit?
c The firm can sell a helmet for $34 What is the profit-maximizing level of output?
Task 3 Member _________ Why is the marginal revenue for a firm in com/economics/perfect-competition”>perfect competition equal to the market price?
Task 4 Member_______ Briefly explain why the following statements are either Ture or False:
a Perfectly competitive firms can never earn com/education/social-economic-status”>economic profit
b Perfectly competitive firms seek to maximize both per-unit and total profit
c Sometimes, profit-maximization is the same as loss-minimization
d The marginal cost curve, above the minimum AVC, is the com/economics/demand-supply”>supply curve for the perfectly competitive firm