7- 15- 24 PERFECT COMPETITION EXERCISE MICRO ECONOMICS Begin with your exercise called Cost of Production Exercise #1 Qoutput TVC TC AVC ATC MC O 0 $3.00 5.00 N 8.00 9.20 11.40 14.90 11 111 19.90 26.90 00 36.90 Assume the price in the perfectly competitive market is $5.00 Recreate your excel table Adding the following columns: Price, TR, MR and Profit Cut and paste the table into a word document and answer the following questions. A. What is the optimum point of production (output) for this firm? units B. Is this firm making a profit or loss? How much? C. What happens if the price drops to $2.50? Create a new table with this new price and recalculating TR, MR and profit, Does the optimum point of production change? To what? WHY? D. Would the firm be making money or loosing money at this output? E. Would they stay in business or not? Explain why or why not