Problem Set # 3 –
Economics 212 (Micro) Name(s):
__________________
Ron Dunbar – MATC –
Fall 2016 ___________________
___________________
1. (6 pts.) Please
answer the questions below this table.
(1) (2) (3) (4) (5) (6) (7)
Output (Q) Price
per Unit
(P) Total
Revenue (TR) Marginal Revenue (MR) Total Cost (TC) Average Total Cost (ATC) Marginal Cost (MC)
0 $10 $8
1 9 11
2 8 12
3 7 15
4 6 24
5 5 35
6 4 48
a. Does this
data represent the revenues and costs of a perfect competitive firm or a firm
with some degree of âmonopoly powerâ? ______________________
How do you know?
________________________________________________
b. Fill in
the blanks in the table above.
c. How much
output should this firm produce to maximize itâs profit? _____units. What price should this firm charge for its
product? $_____ per unit.
This choice of output and price will lead to an economic
profit = $______
d. In the graph
space below, please draw this firmâs Demand Curve, MR curve, MC curve, and ATC
curve. On the graph, please indicate the
(1) profit maximizing level of output, (2) the price the firm will charge, and
(3) the resultant level of profits.
(NEXT PAGE)
2. (14 pts.) Multiple Choice: Please answer the following Multiple Choice
questions by circling the letter corresponding to the best answer.
1. In long-run
equilibrium, a perfectly competitive firm produces:
a) where P = MC = LRAC.
b) at the lowest point on its LRAC
curve (i.e. at âMinimum Efficient Scale (MES)â).
c) where its LRAC curve is tangent to
its horizontal Demand curve (i.e. where ?=$0).
d) at a level of output such that all
of the above are true.
2. If a perfectly competitive
industry is bearing economic losses (?<$0)>