A perfectly competitive firm Cat Paradise sells clothing for cats. A cat-suit sells for $72 each. The fixed costs for production are $100. The total variable costs are $64 for one suit, $84 for two suits, $114 for three suits, $184 for four suits, and $270 for five suits. a) In a table, calculate TR, MR, TC and MC for each output level (one to five suits). (10 marks) b) What is the profit maximizing quantity? (5 marks) c) If the advent of new and better technology in a perfectly competitive market leads to a large reduction in costs of production, how will this affect the market?
A perfectly competitive firm Cat Paradise sells clothing for cats. A
cat-suit sells for $72 each. The fixed costs for production are $100.
The total variable costs are $64 for one suit, $84 for two suits, $114
for three suits, $184 for four suits, and $270 for five suits.
a) In a table, calculate TR, MR, TC and MC for each output
level (one to five suits).
(10 marks)
b) What is the profit maximizing quantity?
(5 marks)
c) If the advent of new and better technology in a perfectly
competitive market leads to a large reduction in costs of production,
how will this affect the market?
