Microeconomics I - Market Demand - Demonstrate the Firm’s Equilibrium - Economics Assignment Help

Assignment Task:

AR = Average revenue; MR = Marginal revenue; TC = Total cost; TVC = Total variable cost; AC = Average cost; AVC = Average variable cost; MC = Marginal cost. Under perfect competition, prices, quantity demanded, and quantity supplied of a new cooking device are shown in Table 1. An individual firm’s output levels and costs are presented in Table 2.

1) On a 1mm or 2mm square-unit graph paper, demonstrate two graphs: one for the market demand and market supply curves on the left side and the second for the perfectly competitive firm’s price level on the right side. (hint: see slide 7 of Lecture Lesson 9.) (7 marks)

2) Compute the leftover values in Table 2. (hint: formula must be shown.) (9 marks) Strictly Copyrighted Item 3

3) On a new (1mm or 2mm square-unit) graph paper, demonstrate the firm’s equilibrium based on your calculated answers in Table 2. (hint: AR, MR, Price, AC, AVC, and MC curves must be plot.) (7 marks)

4) From your graph to question 3, assess the following matters.

i) Does the firm make a profit or loss? (hint: apply the six-step procedure.) (6 marks)

ii) Should the firm shut down? Why? (hint: is AVC > P?) (4 marks)

5) On a new (1mm or 2mm square-unit) graph paper, demonstrate the firm’s new equilibrium in the long run. Assume calculated values of AC and MC in Table 2 remain unchanged. (hint: plot a new price = AR = MR.)

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