The licorice industry, economics homework help

PLEASE: Show details of work w/tables & Graphs

Question 6.  (20 points)  The licorice industry is competitive. The current market price of a string of licorice is $0.50.  At this price, a firm decides to produce 2 million strings of licorice this month.  The total fixed cost per month is $400,000 and the average variable cost of $0.40

  1. a. What is the marginal cost of a string at 2 million strings of production level?
  1. b.Assuming that one month is considered a short run, is the firm’s decision to produce 2 million strings of licorice this month right or wrong?  Explain the reason. 

Question 7.  (30 points)  Consider the following table.  The price of the product is $4. 


Quantity     Total cost 

    0                    $10

    2                      11

    4                      12

    6                      13

    8                     15

    10                   21

     12                  29

     14                  39

  1. a. Calculate profit for each quantity.  How much should the firm produce to maximize profit?
  1. b. Calculate marginal revenue and marginal cost for each quantity.  Graph them.  At what quantity do these curves cross?  How does this relate to your answer to part (a)?
  1. c.Can you tell whether this firm is in a competitive industry?  If so, can you tell whether the industry is in a long-run equilibrium? 

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