A firm in a perfectly competitive industry

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1) Consider a firm in a perfectly competitive industry using data in this spreadsheet . The firm has just built a plant that cost $1,500. Each unit of output requires $5 worth of materials. Each worker costs $3 per hour.
Using this information, fill in the missing cells in this spreadsheet. Upload your competed spreadsheet.
Graph your results using Excel and insert the graph into this document.

2) Using your results from your spreadsheet, if the market price is $12.50, how many units of output will the firm produce?

3) At that price, what is your firm’s profit or loss? (Profit should be a positive number, loss a negative number.)

4) Will the firm continue to produce in the short run? Carefully explain your answer.

5) Pitt Pit sells in two geographically divided markets, the East and the West. Marginal cost is constant at $50 in both markets. Demand and marginal revenue in each market are as follows:

QEast = 900 – 2*PEast
MREast = 450 – QEast
QWest = 700 – PWest
MRWest = 700 – 2*QWest
Find the profit-maximizing price and quantity in each market (show the work)

6) What is the economic profit in each market?

7) In which market is demand more elastic? Explain your reasoning.

8) Graph your results. (Either by Excel or by hand.) Upload an image (photograph of a hand drawn graph is okay) of your work.

 

9) In the textbook, The Applied Theory of Price, D. N. McCloskey refers to the equation MR = MC as the rule of rational life. What types of firms follow this rule? (Pick which one of the following four choices that you think best answers this question.)

Group of answer choices

a) Only competitive firms follow this rule.

b) Only monopolies follow this rule.

c) All types of firms follow this rule.

d) The decision of whether to follow this rule depends on the shape of a firm’s cost curves.

 

 

Sample Solution

In1981 Ministerial Joint Commission noted that to remedy inadequacy of shipping services for increasing trade between the two countries, efforts would be made to explore the possibilities among others, of trans-shipment of goods through Gulf ports. At that time the experts decided to meet and to study the matter. During Nineteen hundred eighties, the items of export from Pakistan included rice, iron steel, billet stainless steel sheet, cotton yarn, grey, cloth, surgical instruments, jute yarn, basin cloth and jut looms. Turkey offered Pakistan a 50 million dollars short term revolving credit facility for increasing the size of trade between the two countries. A separate protocol was endorsed between the State Bank of Pakistan and the Central Bank of Turkey finalizing banking arrangements related to the revolving credit (Hassan, 2002).
In the start of eighties (1981) Pakistan began to strain fact that the Muslim countries must strengthen their trade relations with each other, so that their economies could growth, the curse of poverty be excluded and they become less dependent on the West. That time of thoughtful owing to the various factors. The Iranian revolution ensured taken the world by storm. It needed crushed the myth that Western help is essential component for progress. Instead the people of the Muslim world had become influenced that great deeds could be realized through the motivation of masses. Islamic revolution needed enthralled the Muslim countries and they were more eager than before to forge strong ties with the brethren.
At the same time a procedure for greater economic and technical cooperation was signed between Turkey and Pakistan on November 12, 1981. Thus both sides Pakistan and Turkey noted that the size of trade was motionless low and therefore identified the constraints, inadequate shipping and telecommunications links and lack of contacts between businessmen. It was also noted between the steps taken to recompense the situation was, Ankara’s restitution of rice agreement with Pakistan and its offers was that to five lac (half million) tons of cement for sale to Pakistan. Turkey was also allowed the opening

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