Scribd
Upload
364 views

Econ 203 Lab 7 b06

Uploaded by

api-235832666
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
364 views

Econ 203 Lab 7 b06

Uploaded by

api-235832666
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 15

ECON 203 LAB 7

Section 1: Test Your Understanding


True or False? No industry, now or in the past, has met all of the requirements of perfect competition.

True or False?
Under perfect competition the product of any one seller must be the same as the product of any other seller.

True or False?
For a perfectly competitive firm, choose the output rate at which marginal cost is equal to price.

True or False?
If a firms marginal cost curve intersects its average variable cost curve at $4 per unit out output, the firm will shut down in the short run if the price of its product falls below $4 per unit.

True True True True

Section 2: Applications
1) Suppose that the total costs of a perfectly competitive firm are as follows:
Output Rate 0 1 2 3 4
5

Total cost 40 60 90 130 180


240

A) If the price of the product is $50, what output rate should the firm choose?

Produce where P=MC Output Rate 0 1 2 3 4 5 Total cost 40 60 30 90 40 130 50 180 60 240 Marginal cost 20

Should produce 3 or 4 units.

B)Suppose the firm experienced an increase of $30 in its fixed costs. What is its new total cost function?

Output Rate 0

Total cost +30 =New TC 40+30=70

60+30=90

90+30=120

130+30=160

4 5

180+30=210 240+30=270

C) What effect will this increase in its fixed costs have on the output it will choose? None.

Output Rate 0

Total cost +30 =New TC 40+30=70

MC new

20 1 60+30=90 30 2 90+30=120 40 3 130+30=160 50 4 180+30=210 60 5 240+30=270

D) After the increase in fixed costs, what does the firms marginal cost curve look like? As above. Same as before the increase in fixed cost.

E) After the increase in fixed costs, what output rate would the firm choose if the price of its product were $40?

2 to 3 units.

You might also like