Question - Cost Schedule Analysis for a Firm
Solution:
TVC = Output \times Marginal Cost
TC = Total Fixed Cost + TVC
At output 1: TVC = 1 \times 10 = 10, TC = 20 + 10 = 30
At output 2: TVC = 2 \times 20 = 40, TC = 20 + 40 = 60
At output 3: TVC = 3 \times 30 = 90, TC = 20 + 90 = 110
At output 4: TVC = 4 \times 40 = 160, TC = 20 + 160 = 180
(b) To calculate the Total Revenue (TR) at each level of output if price is $30:TR = Price \times Output
At output 1: TR = 30 \times 1 = 30
At output 2: TR = 30 \times 2 = 60
At output 3: TR = 30 \times 3 = 90
At output 4: TR = 30 \times 4 = 120
(c) To calculate the profit/loss at each level of output:Profit/Loss = TR - TC
At output 1: Profit/Loss = 30 - 30 = 0
At output 2: Profit/Loss = 60 - 60 = 0
At output 3: Profit/Loss = 90 - 110 = -20 (loss)
At output 4: Profit/Loss = 120 - 180 = -60 (loss)
(d) The firm will be in equilibrium at the output level where TR = TC:At output 1 and 2 the TR equals TC, so the equilibrium price would be at output levels 1 and 2 if the price should remain at $30.
(e) With the provided information, it's not possible to determine the time period of the firm's operation, as it requires additional business cycle data or context.CamTutor
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