Question
Consider the following demand and cost condition information about Firm M, which produces Good N. Note: Q* indicates profit maximizing output level. Highest price where
Consider the following demand and cost condition information about Firm M, which produces Good N.Note: Q* indicates profit maximizing output level.
Highest price where the quantity of output is equal to zero = R1200
Price at Q*= R650
MC at Q*= R260
AVC at Q*= R150
AFC at Q*= R300
Price at allocative efficient output level = R400
The allocative efficient level of output = 180 units
Total fixed cost = R33000
MC at output equal to zero = R100
1.1. Assuming profit-maximizing behavior, calculate each of the following for Firm M.
ATC = R ___________________
Q*=________________________units
Profit / loss = R_________________________
Lerner index =_________________________
Mark-up =_____________________________
Consumer surplus = R_________________
Deadweight-loss = R___________________
TVC = R____________________
1.2. Calculate the consumer surplus and producer surplus at an allocative efficient level of output (i.e. perfectly competitive market outcome).
Consumer surplus =_______________________
Producer surplus =________________________
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