Question

The table below shows cost information for a perfectly competitive firm. Quantity Marginal Cost 0 — 1 2 2 5 3 9 4 14 5 20 6 27 7 35 Instructions: Enter your answers as a whole number. a. If the price of the product is $10, the firm will produce: units. b. If the price of the product is $20, the firm will produce: units.

Answer 1

The answer to (a) is: 3 units and the answer to (b) is: 5 units.

To find the quantity of units a perfectly competitive firm will produce at different prices, compare the marginal cost with the given prices. The firm will produce the quantity at which marginal cost equals the given price.

a. If the price of the product is $10, the firm will produce:

Find the quantity where marginal cost equals $10.

For Quantity 1: Marginal Cost = $2

For Quantity 2: Marginal Cost = $5

For Quantity 3: Marginal Cost = $9

For Quantity 4: Marginal Cost = $17

For Quantity 5: Marginal Cost = $20

At a price of $10, the firm will produce 3 units because at this quantity, the marginal cost ($9) is closest to the given price.

Therefore, the answer to (a) is: 3 units.

b. If the price of the product is $20, the firm will produce:

Find the quantity where marginal cost equals $20.

For Quantity 1: Marginal Cost = $2

For Quantity 2: Marginal Cost = $5

For Quantity 3: Marginal Cost = $9

For Quantity 4: Marginal Cost = $17

For Quantity 5: Marginal Cost = $20

At a price of $20, the firm will produce 5 units because at this quantity, the marginal cost ($20) is equal to the given price.

Therefore, the answer to (b) is: 5 units.