A perfectly competitive firm faces a market-determined price of $25 for its product, and its total cost for different quantities of output are shown below. Answer each question (a through g) below. The correct answer to each is worth five points. If you get correct answers to each question a through g, you will receive 35 points, which is an extra two points over the basic 33 points for a Roman numeral question.

The firms total costs are given below. Fill in columns 3 and 4 for average total cost and marginal cost.

Fill in columns 5 and 6 for marginal revenue and profit margin.

How much output should the competitive firm produce? Explain why.

Draw the marginal cost, average total cost curve, and marginal revenue curve for the firm.

Fill in column (7) on total profit. Does your answer from column (7) agree with your answer to part c? If not, explain why.

Identify the profit maximizing level of output on your diagram from part d.

Suppose the demand for the industry product decreases and the price falls to $14. What quantity should the firm produce now? How much is profit?

(2) (3) (4) (5) (6) (7)

Quantity TC ATC MC MR profit per unit Total profit

000 1000

100 2000

200 3300

300 4800

400 7000

500 8000