Consider a kettle firm A in a perfectly competitive market. Table 1 shows the quantityproduced per hour (Q) and the total cost (TC) in the short run.Quantity012345C70268Total cost1730405575100130165210Fixed cost1717171717171717 B) Plot the ATC, AVC, and MC in a graph.C) The price for a kettle is £20. At what output is profit maximised? What is the(supernormal) profit/loss made at the profit-maximising level of output?D) Many other firms can produce kettle at the same costs as firm A. In this scenario, willthe market price remain at £20? Explain what may happen that may drive the marketprice to change.E) What will the bagel firm choose to do in the short run and in the long run if the pricefor a bagel drops to £15?

A perfectly competitive firm is a price taker, which means the price in a competitive market is…

Answered: Consider a kettle firm A in a perfectly…

Consider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity produced per hour (Q) and the total cost (TC) in the short run.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity
produced per hour (Q) and the total cost (TC) in the short run.
Quantity
0
12345C70
2
6
8
Total cost
17
30
40
55
75
100
130
165
210
Fixed cost
17
17
17
17
17
17
17
17

B) Plot the ATC, AVC, and MC in a graph.
C) The price for a kettle is £20. At what output is profit maximised? What is the
(supernormal) profit/loss made at the profit-maximising level of output?
D) Many other firms can produce kettle at the same costs as firm A. In this scenario, will
the market price remain at £20? Explain what may happen that may drive the market
price to change.
E) What will the bagel firm choose to do in the short run and in the long run if the price
for a bagel drops to £15?

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