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Output, Profit, Fixed Costs and Perfect Competition

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1. Consider a firm operating in a perfectly competitive market.
a. How much output will this firm produce ?
b. How much profit (or loss) is this firm making in the short run ?
c. What is the value of average fixed cost at this profit-maximizing output?
d. At what output will average variable cost be minimized?
e. What is the value of average variable cost at its minimum point?
f. If price falls to $5, how much out put will this firm produce?

(see full questions in attachment)

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Solution Summary

The solution is very detailed and well explained. It goes into considerable detail to explain the output the firm will produce and the profit/loss in the short run. It then continues to explain the value of the average fixed cost and the average variable cost. Detailed steps are provided for everything. The response is very well written and easy to understand as well. Overall, an excellent response.

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BrainMass OTA Posting # 2335

Please be as explicit as possible and break-down each step. I learn best this way..Thanks Brian

1. Consider a firm operating in a perfectly competitive markt. Let the market determined price of output be $10 per unit. Assume that the firm's short-run total cost and marginal cost surves have been estimated to be

STC=0.5q3 - 3q2 + 10q + 6

SMC= 1.5q2 - 6q + 10

a. How much output will this firm produce ?
b. How much profit (or loss) is this firm making in the short run ?
c. What is the value of average fixed cost at this profit-maximizing output?
d. At what output will average variable cost be minimized?
e. What is the value of average variable cost at its minimum point?
f. If price falls to $5, how much out put will this firm produce?

2. A firm's short-run margianl cost curve SMC = q2 + 20q + 100. Calculate the firm's short-run supply curve with q as a function of p, the market price.

3. A competitive firm has the following long-run total cost and marginal cost curves

LTC = q3 - 40q2 + 430q

LMC = 3q2 - 80q + 430

a. How much ...

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