Answer the next questions (Parts A and B) on the basis of the following cost data for a firm operating in pure competition:
OUTPUT —— TFC ———- TVC
0 $500.00 0.00
1 500.00 90.00
2 500.00 160.00
3 500.00 200.00
4 500.00 260.00
5 500.00 340.00
6 500.00 450.00
(a.) Refer to the above data. If the product price is $55 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
(b.) Refer to the above data. If the product price is $200 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations. (Points : 30)
