The Competitive Firm
Suppose that a perfectly competitive firm has the short run total cost function shown
1. Complete the above table by filling in the MC, ATC and AVC
2. What is the fixed cost for the representative firm?
3. Using the data in the table, at what
output does Average Total Cost reach its minimum?
4. Using the data in the table, at what output does
Average Variable Cost reach its minimum?
There are 1,000 firms in the industry identical to
the one shown in the above table.
5. Suppose that the price in the market place
is $6 per unit. What output will be produced by the firm represented
by the data in the above table?
6. At the price and output of question 5 is the
firm earning a profit? Yes
7. Suppose that the price in the market place
is $6 per unit. What will be the aggregate output for the entire
The market demand curve for their homogeneous
product is as follows:
8. What is the equilibrium price in the market?
9. What will be the output of each firm
10. In the short run will firms shut down Yes or No?
11. Will there be exit in the long run Yes or No?
12. What will be the number of firms in this industry in the
long run (you can assume that short run cost structures do not change as firms enter and