Answer the Following Questions

question 76

Essay

Answer the following questions.
a. In a perfectly competitive industry, the industry demand and supply curves are given by Q^D = 2,500 - 50P and Q^S = 20P - 300. Given the market conditions, graph the competitive firm's demand and marginal revenue curves.
b. Graph a competitive firm that is earning economic profit. In your graph, indicate the level of profit by shading in the appropriate area.
c. A perfectly competitive firm is selling 2,000 units at a price of $3, with average total cost equal to $1.85. Calculate the firm's profit.

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Definitions:

Cement Manufacturer

A company engaged in the production of cement, a key ingredient in concrete.

Fixed Expenses

Costs that do not vary with the level of production or sales over a given period, such as rent or salaries.

Margin Of Safety

The difference between actual or budgeted sales and the break-even point, indicating the risk level of not covering fixed costs.

Contribution Format

A form of income statement where costs are divided into variable and fixed, and the contribution margin is calculated to determine profitability.