Tutorial 4 Answer - Perfect Competition PDF

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Perfect Competition...

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Tutorial 4 Answer

1. a) Quantity (unit) 1 2 3 4 5 6

Average Revenue (RM) 30 30 30 30 30 30

Total Revenue (RM) 30 60 90 120 150 180

Marginal Revenue (RM) 30 30 30 30 30 30

Total Cost (RM)

Marginal Cost (RM)

55 85 100 120 145 180

55 30 15 20 25 35

b) The firm is operating in a perfect competition market. Because AR=MR. c) Equilibrium output = 2. TR−TC =60 −85 =−25 .

Thus, at equilibrium output, the firm is having a loss. d) 1. Many buyers and sellers. 2. Free entry and exit.

2. a) Calculate the marginal cost and marginal revenue at each output level. Output (unit) 0 1 2 3 4 5 6 7 8

Total Cost (RM) 80 82 88 100 124 160 208 268 340

Marginal Cost (RM)

Price (RM)

2 6 12 24 36 48 60 72

80 72 64 56 48 40 32 24 16

Total Revenu e (RM) 72 128 168 192 200 192 168 128

b) Profit-maximizing price = RM48 Output = 4 units c) Calculate the total amount of profit at equilibrium.

Average Revenue (RM)

Marginal Revenue (RM)

72 64 56 48 40 32 24 16

72 56 40 24 8 -8 -24 -40

Profit =TR−TC =192− 124=RM 68 d) Economic profit...