HOMEWORK:Perfect Competition Problems:

There are 7 Problems

Short-Run Equilibrium Of the Firm; Total Approach:

Questions:

1A.

How can the firm increase its output in the short run?

B.

How many units of the commodity can the firm sell in the short run at the equilibrium price?

C.

What crucial assumption do we make in order to determine the equilibrium output of the firm?

Problem #2

2.

If the SRTC (STC) of a firm at various levels of output is given by the values in the table below, and

TR = P(Q) = $4.00 (Q)

A.

Determine the level of output at which the firm maximizes total losses, breaks even, and maximizes total profits;

B.

Plot the"TR"and "STC" schedules on set of axes and label (on the STC curve)

"A" the point of total loss maximization,

"B"and"E"the break-even points,

"C" the point of lowest"SAC",

"D" the point of total profit maximization;

C.

Plot the total profit schedule.

D.

At which point is the firm in short-run equilibrium?

Q

0

100

200

300

400

500

600

700

750

800

900

STC($)

400

1000

1300

1500

1600

1700

1850

2100

2265

2500

3600

Question #3

Explain what is meant by each of the four components of the definition of perfect competition given in your notes?

Question: 4

4A.

Does perfect competition as defined above exist in the real world?

4B.

Why do we study the perfect competitive model?