The following table shows the total cost incurred by a firm in the short run. The firm is able to sell any amount of its output at the price of $10 per unit.

Output Total Cost

0 10

1 16

2 20

3 22

4 23

5 27

6 36

7 48

8 61

9 81

10 106

(a) Expand the table and calculate the fixed cost, the variable cost, the average fixed cost,

the average variable cost, the average total cost and the marginal cost for all the

output. Comment on the relationships among the various costs (i.e., you should

consider four (4) relationships). Explain the importance of marginal cost and average

total cost in making business decisions.

(b) What is the quantity that the firm should produce? Compute the profit or loss at this

quantity.

(c) If the market that the firm operates is perfectly competitive, examine the market

structure and explain what will happen to the firm in the long run.