The Long Run Production of Bicycles and Average Costs
Consider the long-run production of Bicycles. The cost of the indivisible inputs used in the production of bicycles is $6000 per day. To produce one Bicycle per day, the firm must also spend a total of $80 on other inputs-labor, materials, and other capital. For each additional bicycle, the firm incurs the same additional cost of $80.
Draw a graph of perfectly competitive market and explain equilibrium of the firm by choosing output level at which
Compute the average cost for 30 bicycles, 60 bicycles, 100 bicycles, and 300 bicycles. (1 marks)
Draw the long-run average cost curve for 30,60,100 and 300 bicycles per day. (1 marks)
P=MC=MR and Firm is making zero economic profit (1 Mark)
P=MC=MR and Firm is making a loss (1 Mark)
Explain shut down rule with the help of graph (1 Mark)
Note : No matching ratio .
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