Question
Assume a perfectly competitive market. Your company's cost for each quan- tity is shown as below. How many would you produce if the market price
Assume a perfectly competitive market. Your company's cost for each quan-
tity is shown as below. How many would you produce if the market price
is 28? Answer this by comparing the prots with and without production.
quantity total cost
0 50
1 100
2 128
3 148
4 162
2. Assume a perfectly competitive market. Let the your rm's xed cost is
10 and the market price is 3. When you produce 3, the marginal and the
variable costs are 3 and 6, respectively. How much will you produce in order
to maximize the prot or minimize the loss?
(Use this for questions 3 and 4) Let Q denote the quantity of pizza. A
pizza producer has variable cost (VC) and xed cost (FC) as
V C = Q2
FC = 4:
3. Assume a perfectly competitive market. What happens if the market price
is $3? Decide whether to produce or not. If you produce, how many? For
your decision, how much is the prot or loss?
4. Assume a monopoly. Along with the VC and FC given above, you find that
the market demand function is
P = - Q + 40:
How much will you produce and how much will you charge in order to
maximize your prot? Find the amount of profit.
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