PLEASE: Show details of work w/tables & Graphs
Question 6. (20 points) The licorice industry is competitive. The current market price of a string of licorice is $0.50. At this price, a firm decides to produce 2 million strings of licorice this month. The total fixed cost per month is $400,000 and the average variable cost of $0.40
- a. What is the marginal cost of a string at 2 million strings of production level?
- b.Assuming that one month is considered a short run, is the firm’s decision to produce 2 million strings of licorice this month right or wrong? Explain the reason.
Question 7. (30 points) Consider the following table. The price of the product is $4.
Quantity Total cost
- a. Calculate profit for each quantity. How much should the firm produce to maximize profit?
- b. Calculate marginal revenue and marginal cost for each quantity. Graph them. At what quantity do these curves cross? How does this relate to your answer to part (a)?
- c.Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium?