Assignment 3 (ECON-101)
Fahad_88
NewMicrosoftWordDocument2.docxAssignment Questions
Question 1
The following graph represents the situation of Sindbad’s caps, a firm selling caps in the perfectly competitive caps industry.
1. How much output should Sindbad produce to maximize his profit, if the market price is equal to $11?
1. How much profit (loss) will he earn?
1. Indicate the profit (loss) area on the graph.
1. Suppose Sindbad decides to shut down. What would his loss be?
Question 2
John produces table lamps in the perfectly competitive desk lamp market.
1. Fill in the missing values in the following table:
|
Output per week |
Total Cost |
AFC |
AVC |
ATC |
MC |
|
0 |
$100 |
|
|
|
|
|
1 |
150 |
|
|
|
|
|
2 |
175 |
|
|
|
|
|
3 |
190 |
|
|
|
|
|
4 |
210 |
|
|
|
|
|
5 |
240 |
|
|
|
|
|
6 |
280 |
|
|
|
|
|
7 |
330 |
|
|
|
|
|
8 |
390 |
|
|
|
|
|
9 |
460 |
|
|
|
|
|
10 |
540 |
|
|
|
|
1. Suppose the equilibrium price in the desk lamp market is $30. How many table lamps should John produce? How much profit will he make?
1. If next week the equilibrium price of desk lamps drops to $15, should John shut down? Explain.
