On the Diagram Average Fixed Cost is the highest at what qua

On the Diagram Average Fixed Cost is the highest at what quantity? On the diagram Average VARIABLE is the highest at what quantity? What kind of industry is this firm in? What is the profit maximizing Quantity on this firm? What is the profit maximizing price for this firm?

Solution

26. AFC is highest at zero level. It is infinity at this level.

27. AVC is not given AC is highest at 800 units.

28. This firm is in imperfect competitin either monopoly or monopolistic competition because AR and MR curves are downward sloping.

29. Profit maximizing quantity is 100 units where MC = MR and MC is rising thereafter.

30 Profit maximizing price is $1.

31. Maximum profit is TR-TC = Q (AR-AC) at 100 units, AR = 12 and AC = 4 Q = 100

Profit = 100(12-4) = $800.