1.      Consider a firm in a perfectly competitive industry. The firm has just built a plant that cost $25,000. Each...

1.      Consider a firm in a perfectly competitive industry. The firm has just built a plant that cost $25,000. Each unit of output requires $5 worth of materials. Each worker costs $5 per hour.

a.       Based on the information above, fill in the table below.

Where;             TFC is total fixed cost

                        TVC is total variable cost

                        TC is total cost

                        MC is marginal cost

                        AVC is average variable cost

                        ATC is average total cost.

b.      If the market price is $10, how many units of output will the firm produce?

c.       At that price, what is the firm’s profit or loss? Will the firm continue to produce in short-run? Carefully explain your answer.

d.      Graph your results

2.      Suppose the demand curve for a monopolist is Q_D =500-P, and total revenue function is TR=500Q – Q². The monopolist has a total cost function of TC=50Q.

a.       Find the monopolist’s profit-maximizing output and price.

b.      Calculate the monopolist’s profit.

c.       What is the Learner Index for this industry?