3.4 The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market.

a. Complete the following table for a single firm in the short run.

OUTPUT TFC TVC TC AVC ATC MC 0 $150 $ 0 – – – –

1 – 40 – – – –

2 – 100 – – – –

3 – 180 – – – –

4 – 280 – – – –

5 – 400 – – – –

6 – 560 – – – –

7 – 760 – – – –

8 – 1,000 – – – –

9 – 1,300 – – – –

10 – 1,850 – – – –

b. Using the information in the table, fill in the following supply schedule for this individual firm under perfect competition and indicate profit (positive or negative) at each output level. (Hint: At each hypothetical price, what is the MR of producing 1 more unit of output? Combine this with the MC of another unit to figure out the quantity supplied.)

Price Quantity Supplied Profit

$ 40 – –

70 – –

110 – –

140 – –

180 – –

220 – –

260 – –

400 – –

c. Now suppose there are 100 firms in this industry, all with identical cost schedules. Fill in the market quantity supplied at each price in this market.

Price Market Quantity Supplied Market Quantity Demanded

$ 40 – 1,700 70 – 1,500 110 – 1,300 140 – 1,100 180 – 900 220 – 700 260 – 500 400 – 300