#Workers Output TFC TVC MC AVC ATC
1.Consider a firm in a perfectly competitive industry. The firm has just built a plant that costs $15,000. Each unit of output requires $5 worth of materials.Each worker costs $3 per hour.
(a) Based on the information above, fill in the table above
(b) If the market price is $12.50, how many units of output will the firm produce?
© At that price, what is the firms profit lost? Will the firm continue to produce in the short run?Carefully explain your answer.
(d) Graph the results.
2. Draw graphs showing a perfectly competetive firm and industry in long-run equilibrium.
(@) How do you know that the industry is in long run equilibrium?
(b) Suppose that there is an increase in demand for this product? Show and explain the short-run adjustment process for both the firm and the industry.
© Show and explain the long run adjustment process for both the firm and the industry. What will happen to the number of firms in the new long-run equilibrium?
3.Draw a graph for a perfectly competitve firm and identify the shut dwonpoint, the breakeven point and the and the firms short-run supply curve, using Marginal Cost, Average Total Cost, and Average Variable Cost.
The long run adjustment process is summarized.