Unit 4: Economies and Diseconomies of Scale & Perfect Competition
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Unit 4 Project
Chapter 8 – question 10, page 201
10. (Short-Run Profit Maximization) A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is $150.
Output FC VC TC TR Profit/Loss
0 $100 $ 0 ___ ___ ___
1 100 100 ___ ___ ___
2 100 180 ___ ___ ___
3 100 300 ___ ___ ___
4 100 440 ___ ___ ___
5 100 600 ___ ___ ___
6 100 780 ___ ___ ___
a. Complete the table.
b. At what output rate does the firm maximize profit or minimize loss?
c. What is the firm’s marginal revenue at each positive level of output? Its average revenue?
d. What can you say about the relationship between marginal revenue and marginal cost for output rates below the profit-maximizing (or loss-minimizing) rate? For output rates above the profit-maximizing (or loss-minimizing) rate?