Assume that the potato industry is perfectly competitive and that the market price is $29 per bushel...

Question

Assume that the potato industry is perfectly competitive and that the market price is $29 per bushel of potatoes.
The following figures describe the associated daily costs of production for any individual farmer operating in this industry:

Total	Average	Marginal	Total	Marginal
Output	Cost	Cost	Cost	Revenue	Revenue
0	$ 5,000
100	$ 5,500
200	$ 6,200
300	$ 7,500
400	$ 9,600
500	$ 12,500
600	$ 16,200
700	$ 20,300
800	$ 24,800

a. How much are fixed costs?
b. Calculate a average costs (AC), marginal costs (MC), total revenue (TR), and marginal revenue (MR).
c. Graph average costs (AC), marginal costs (MC), marginal revenue (MR), and the firm’s demand curve.
c. How many bushels of potatoes will an individual farmer produce? Explain why. Illustrate this on the graph.
d. Is the farmer making a profit? If so, what is the profit per unit? What is the total profit? If not, what is the loss per unit? What is the total loss?
e. Is the farmer producing at the most efficient level of output? Explain why or why not.

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David · Accepted Answer

Biewener							Principles of Microeconomics
Biewener
Principles of Microeconomics
Economics 100
Homework 16
Short Run Production Decision of an Individual Firm
Operating in a Perfectly Competitive Market
Assume that the potato industry is perfectly competitive and that the market price is $29 per bushel of potatoes.  
The following figures describe the associated daily costs of production for any individual farmer operating in this industry:
	
	Total 
	Average
	Marginal
	Total
	Marginal
	Output
	Cost
	Cost
	Cost
	Revenue
	Revenue
	0
	 $   5,000 
	
	
	
	
	100
	 $   5,500 
	
	
	
	
	200
	 $   6,200 
	
	
	
	
	300
	 $   7,500 
	
	
	
	
	400
	 $   9,600 
	
	
	
	
	500
	 $ 12,500 
	
	
	
	
	600
	 $ 16,200 
	
	
	
	
	700
	 $ 20,300 
	
	
	
	
	800
	 $ 24,800 
	
	
	
	
a.  How much are fixed costs?

Assume that the potato industry is perfectly competitive and that the market price is $29 per bushel of potatoes. The following figures describe the associated daily costs of production for any...

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