Table 1 shows the total cost schedule for a competitive firm. Price per unit of output is £7. QuantityTotal Cost0151252303344385456557708100 Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginalrevenue (MR=∆TR/∆Q) for each level of output. Plot ATC, MC and MR on a graph and mark the profit-maximising (loss minimising) At what output level is profit maximised (loss minimised)? How much profit/loss is made at the optimum level of output? Assume that the firm’s minimum average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run? If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.

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Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section12.3: The Various Measures Of Cost

Problem 3QQ

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Table 1 shows the total cost schedule for a competitive firm. Price per unit of output is £7.

Quantity	Total Cost
0	15
1	25
2	30
3	34
4	38
5	45
6	55
7	70
8	100

Calculate average total cost (ATC=TC/Q), marginal cost (MC=∆TC/∆Q) and marginalrevenue (MR=∆TR/∆Q) for each level of output.
Plot ATC, MC and MR on a graph and mark the profit-maximising (loss minimising) At what output level is profit maximised (loss minimised)?
How much profit/loss is made at the optimum level of output?
Assume that the firm’s minimum average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run?
If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.

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Assume that the firm’s minimum average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run?
If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.

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Follow-up Question

Assume that the firm’s minimum average variable cost is £6.5. Should the firm continueoperating in the market in the short run? In the long run?
If the firm is typical of other firms in the market, what price will it charge in the long run? Explain.

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please solve 4 and 5

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