Question
The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the
The table below shows the average cost (AC) for a purely competitive market. The average revenue (AR) is constant at RM5 per unit and the firm's total fixed cost (TFC) is RM4.
| Output (Units) | Total Revenue (RM) | Average Cost (RM) | Total Cost (RM) | Marginal Cost (RM) | Marginal Revenue (RM) |
| 1 | 8.0 | ||||
| 2 | 5.5 | ||||
| 3 | 4.0 | ||||
| 4 | 3.5 | ||||
| 5 | 3.8 | ||||
| 6 | 4.5 | ||||
| 7 | 6.0 |
Please answer all questions below:
- Fill in the values for total revenue (TR), total cost (TC) and marginal cost (MC) in the column provided. (8)
- Determine the profit maximizing output. (2)
- Show the equilibrium of the firm in a diagram. (4)
- If the average revenue falls to RM3 per unit, calculate the firm's new profit or loss at the equilibrium. (4)
- Based on your answer in part (d), should the firm continue or stop the production? Justify.
(2)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
