1134 Words5 Pages

Written Assignment 3
Answer all of the following questions. Title your assignment "Written Assignment 3," unless your mentor directs otherwise. This assignment covers text chapters 13 through 17. 1. At its current level of production, a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10. At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1000 units. What is the firm's current profit? What is likely to occur in this market, and why? A) Profit = (12.50 – 10) X 1000 = $2500. As there exists positive economic profit in this perfectly competitive industry in the short run ( as the price exceeds the average total cost), new firms will be attracted to enter the industry. As new firms enter the industry, the total market production increases, this will bring down the market price and thus, result in a fall in profits. This entry of new firms will continue till the economic profits in the long run becomes equal to zero, after which there will be no incentive for any new firm to enter. 2. In order to determine whether time is being spent optimally, a commercial fisherman has recorded the following information over the past year: "hours spent fishing" and "quantity of fish caught." What is the marginal product of fishing for hour spent? Hours/day | Total Quantity of Fish (tons) | Marginal Product | 0 | 0 | 0 | 1 | 10 | 10 | 2 | 18 | 8 | 3 | 24 | 6 | 4 | 28 | 4 | 5 | 30 | 2 | 6 | 31 | 1 | 3. The fisherman has a fixed cost of $200 per day and variable costs of $150 per hour (wages and fuel). a. Fill in the information missing in the following table. Hours/ day | Total Fixed Costs | Total Variable Costs | Total Costs | Marginal Costs | 0 | 200 | 0 | 200 | 0 | 1 | 200 |

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