4. KEY QUESTION Assume the following cost data are for a purely competitive producer:

Average Average Average Total fixed variable total Marginal product cost cost cost cost 0

1 $60.00 $45.00 $105.00 $45 2 30.00 42.50 72.50 40 3 20.00 40.00 60.00 35 4 15.00 37.50 52.50 30 5 12.00 37.00 49.00 35 6 10.00 37.50 47.50 40 7 8.57 38.57 47.14 45 8 7.50 40.63 48.13 55 9 6.67 43.33 50.00 65 10 6.00 46.50 52.50 75

a. At a product price of $56, will this firm produce in the short run? Why or why not? If it does produce, what will be the profitmaximizing or loss-minimizing output?

Explain. What economic profit or loss will the firm realize per unit of output?

b. Answer the questions in 4a assuming product price is $41.

c. Answer the questions in 4a assuming product price is $32.

d. In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).

(1) (2) (3) (4)

Price Quantity Profit (+) Quantity supplied, or loss (–) supplied, single firm 1500 firms

$26 ______ $______ ______ 32 ______ ______ ______ 38 ______ ______ ______ 41 ______ ______ ______ 46 ______ ______ ______ 56 ______ ______ ______ 66 ______ ______ ______