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Assume that a purely competitive firm is selling 2,000 television sets a day at a cost of $90,000. Assume that if the firm sells 1,600 units per day, its total cost would be $60,000, and if it sold 1,000 units per day, it would have a total cost of $55,000.
- Calculate the average total cost at these different sales levels.
- Assuming that the cost structure for every firm in the industry is identical, do you think that the industry could be in long-run equilibrium?
- If the industry is perfectly competitive, what would be the long-run equilibrium market price?
- If that price is the market price and every firm in the industry is earning a normal profit of 15%, what would be the profit?
- If a hypothetical company has revenues less than its cost, should it shut down?
- If the company decides to shut down, is that decision final?
- Provide a real-world example to support your answer.
Paper#9255695 | Written in 27-Jul-2016Price : $16