Table 91 Shows the Cost Structure for a Perfectly Competitive Firm

question 69

Essay

Table 9.1 shows the cost structure for a perfectly competitive firm of which there are a total of 100 in the industry $$\begin{array}{l}\text { Table } 9.1\\\begin{array} { c c c } \hline \mathrm { Q } & \mathrm { MC } & \text { ATC } \\\hline 60 & 30 & 43 \\70 & 35 & 41 \\80 & 40 & 40 \\90 & 45 & 41 \\100 & 50 & 43 \\110 & 55 & 46 \\120 & 60 & 50 \\\hline\end{array}\end{array}$$ and Table 9.2 shows the market demand and market supply schedules, $$\begin{array}{l}\text { Table } 9.2\\\begin{array} { c c c } \hline \mathrm { P } & \mathrm { Qd } & { \text { Qs } } \\\hline 30 & 12000 & 6000 \\35 & 11000 & 7000 \\40 & 10000 & 8000 \\45 & 9000 & 9000 \\50 & 8000 & 10000 \\55 & 7000 & 11000 \\60 & 6000 & 12000 \\\hline\end{array}\end{array}$$ a) What is the equilibrium price? At this price what quantity will the firm produce?
b) Is the perfectly competitive firm earning an economic profit or loss in the short-run? How much?
c) In the long run, what is the economic profit of the competitive firm?
d) What will the equilibrium price and quantity traded in the long run?
e) What quantity will the firm produce in the long-run?
f) How many firms will exist in the long-run?
g) Is the representative perfectly competitive firm achieving efficiency?

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Definitions:

Illusory Correlation

Cognitive exaggeration of the degree of co-occurrence of two stimuli or events, or the perception of a co-occurrence where none exists.

External Attribution

The process of attributing the cause of one's own or another's behavior to factors outside the individual, such as the situation or environment.

Just World

The belief that the world is fundamentally fair and that justice prevails, leading individuals to rationalize injustices or victimization.

Actor-Observer Effect

A cognitive bias in which people tend to attribute their own actions to external circumstances but the actions of others to inherent traits.