Question

​[related to solved problem ​#3​] suppose that andy sells basketballs in the perfectly competitive basketball market. his output per day and his costs are as​ follows: output per day total cost variable cost average total cost average variable cost marginal cost 0 ​$10.00 ​$0 ​-- ​-- ​-- 1 15.00 5 ​$15.00 ​$5.00 ​$5.00 2 17.50 7.50 8.75 3.75 2.50 3 22.50 12.50 7.50 4.17 5.00 4 30.00 20.00 7.50 5.00 7.50 5 40.00 30.00 8.00 6.00 10.00 6 52.50 42.50 8.75 7.08 12.50 7 67.50 57.50 9.64 8.21 15.00 8 85.00 75.00 10.63 9.38 17.50 9 105.00 95.00 11.67 10.56 20.00 suppose the equilibrium price of basketballs is​ $2.50. in the short​ run, how many basketballs will andy​ produce? 22 ​(enter a whole​ number).

Answer 1

In a perfectly competitive market, Andy will produce two basketballs in the short run, as this is the quantity at which the marginal cost equals the equilibrium price of $2.50.

Step-by-step explanation:

In a perfectly competitive market, a firm like Andy's basketball business should continue to produce and sell its product as long as the marginal cost (MC) of producing an additional unit is less than or equal to the market price, and stop at the point where MC equals the market price. Given that the equilibrium price of basketballs is $2.50, and looking at the provided information where various costs are outlined, we can determine how many basketballs Andy should produce.

Andy should look at the marginal cost for each output level and compare it to the equilibrium price. He will produce up to the point where marginal cost equals the equilibrium price. The table shows the last unit he should produce at a marginal cost of $2.50 is the second basketball. Producing the third basketball would have a marginal cost of $5.00, which is higher than the equilibrium price, indicating that producing the third basketball would lead to a loss. Therefore, in the short run, Andy will produce two basketballs per day.