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Marginal Cost and an Average Cost Schedule

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Assume that a firm in a perfectly competitive industry has the following total cost schedule:

Output (units) Total Cost ($)
10 $110
15 150
20 180
25 225
30 300
35 385
40 480

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?

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Solution Preview

Hello!
Here are your answers.

Question a
Output (units) Total Cost ($) Marginal Cost($) Average Cost ($)
10 $110
15 150 8 10
20 180 6 9
25 225 9 9
30 300 ...

Solution Summary

The solution calculates a marginal cost and an average cost schedule as well as answering questions on profits per unit and long-run equilibrium.

$2.19