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Microeconomics Homework: Firm's Short-Run Costs and Profit Maximization, Assignments of Microeconomics

The short-run cost functions for a perfectly competitive firm producing gadgets, including average total cost (atc), average variable cost (avc), marginal cost (mc), and quantity produced. The homework assignment requires finding the total fixed costs, profit-maximizing output levels, and total economic profit for given market prices, as well as determining the output levels and profit status for three different market prices based on the given cost functions.

Typology: Assignments

Pre 2010

Uploaded on 08/16/2009

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koofers-user-x38 🇺🇸

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THE PROBLEM BELOW IS DUE FOR HOMEWORK ON TUESDAY, MARCH 10
NAME _________________________________________
The following short-run cost functions are for a perfectly competitive firm that produces
gadgets:
QUANTITY OF
GADGETS
(Q)
AVERAGE
TOTAL COST
(ATC)
AVERAGE
VARIABLE COST
(AVC)
MARGINAL
COST
(MC)
300 5.00 3.666666 2.00
400 4.00 3.00 1.00
500 3.40 2.60 1.00
600 3.083333 2.416666 1.50
700 3.00 2.428571 2.50
800 3.0625 2.5625 3.50
900 4.00 3.555555 11.50
a. Find the firm’s TOTAL FIXED COSTS? (If you get a number with a
decimal place, round to the nearest whole number). EXPLAIN YOUR
REASONING AND SHOW CALCULATIONS. (4 points)
b. For each of the following market prices , find:
The profit-maximizing (loss-minimizing) level of output
The total economic profit that will be earned at the profit-
maximizing level of output.
SHOW ALL CALCULATIONS AND EXPLAIN YOUR REASONING CLEARLY.
(21 points)
i. Price = $3.50.
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THE PROBLEM BELOW IS DUE FOR HOMEWORK ON TUESDAY, MARCH 10

NAME _________________________________________

The following short-run cost functions are for a perfectly competitive firm that produces gadgets: QUANTITY OF GADGETS (Q)

AVERAGE

TOTAL COST

(ATC)

AVERAGE

VARIABLE COST

(AVC)

MARGINAL

COST

(MC)

a. Find the firm’s TOTAL FIXED COSTS? (If you get a number with a decimal place, round to the nearest whole number ). EXPLAIN YOUR REASONING AND SHOW CALCULATIONS. (4 points) b. For each of the following market prices , find:  The profit-maximizing (loss-minimizing) level of output  The total economic profit that will be earned at the profit- maximizing level of output. SHOW ALL CALCULATIONS AND EXPLAIN YOUR REASONING CLEARLY. (21 points) i. Price = $3.50.

ii. Price = $2.50. iii. Price = $1.50.

b. If the price of the product is $100, how many units of output should the firm produce? Explain your reasoning briefly. Is total economic profit greater than, less than, or equal to zero and how can you tell (no numerical calculation is possible). (5 points) c. If the price of the product is $40, how many units of output should the firm produce? Explain your reasoning briefly. Is total economic profit greater than, less than, or equal to zero and how can you tell (no numerical calculation is possible). (5 points)