Answer to Question #157317 in Economics for Iqra

Question

A perfectly competitive firm has the following total cost function:

Total output Total Cost

0 20

1 30

2 42

3 55

4 69

5 84

6 100

7 117

How much will the firm produce if the price of the production the market is Rs. 14 per unit? How will it change its output if price rises to Rs. 16 per unit?

Answer 1

If the price of the production the market is Rs. 14 per unit, then the firm will produce Q = 4 units at which P = MC = 14.

It will change its output to Q = 6 if price rises to Rs. 16 per unit to reach P = MC = 16.