EC 201 Name:________________________Due Date: May 18EC 201 Page 2EC 201 Page 3Output Price Marginal Cost Change in QuantityEC 201 Page 4EC 201 Page 5EC 201 Name:________________________Cal Poly PomonaDr. BresnockSpring, 2006Competition Module Assignment (50 bonus points)Please limit your answers to the spaces provided. If necessary, write on the back of the page. Donot attach printout or additional pages. All questions pertain to the Competition module in theSimEcon® software package. Make sure that you have read the “Competition Manual” andSimEcon® Operation Instructions”. These materials may be found at the Class Web site prior tobeginning the assignment. For many of the assignment’s questions, it will be necessary to referto those instructions. For many of the assignment’s questions, it will be necessary to refer toyour text. All questions in this assignment pertain to the short run unless otherwise stated.Due Date: May 18Open the Competition module. You will see a table entitled, “Firm’s Short Run Costs”. Printout a copy of this table for future reference. If the market price of the product is $98.40, howmuch should the firm produce, i.e. what output will maximize profits or minimize losses?____________. Is the firm earning an economic profit at this output level? __________ (Yes,No). If the market price of the product is $5.60, what is the optimal level of output?____________. Is the firm earning an economic profit at this output level? __________ (Yes,No). Should this firm shut down in the short run, if the price is $5.60. __________ (Yes, No).Why or why not? ______________________________________________________________________________________________________________________________________. At anoutput level of 8,000 units, what is the shut down point? ____________.Click “Continue”. Click the button to set the market price manually. Enter a price of $10.00 andclick “Continue”. Enter an output of 8,000 units and click “Results”. Fill in the values for thetable below.Price: ____________ Profit Margin: ____________Output: ____________ Total Profit: ____________ATC: ____________ MC: ____________AVC: ____________Compute the following results for this scenario. Explain how you got these results, usingformulas and/or computations and/or explanations.Average Fixed Costs: _____________________________________________Total Fixed Costs: _____________________________________________Total Variable Costs: _____________________________________________Total Costs: _____________________________________________Total Revenue: _____________________________________________Marginal Revenue: _____________________________________________Average Revenue: _____________________________________________EC 201 Page 2Competition Module AssignmentIs this output profit maximizing? __________ (Yes, No). Why or why not? __________________________________________________________________________. If this output is notprofit maximizing, what should the firm do? _________________________________. Click“Firm Graph” and draw the resulting graph below. Indicate the current and optimal levels ofoutput. Label all lines and axes.Click “New Output”. This time enter 9,000 units and click “Results”. Fill in the amounts in thetable below.Price: ____________ Profit Margin: ____________Output: ____________ Total Profit: ____________ATC: ____________ MC: ____________AVC: ____________ Is this output profit maximizing? __________ (Yes, No). Why or why not? ________________________________________________. If this output is not profit maximizing, what should thefirm do? _________________________________________. Click “Firm Graph” and draw theresulting graph below. Indicate the current and optimal levels of output. Label all lines andaxes.EC 201 Page 3Competition Module AssignmentWhat is the major difference between the two graphs on the last page in terms of the currentoutput? Also, what are the implications of this difference, i.e. what does this difference show interms of whether production should be increased or decreased? ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________. If production should be increased at anoutput level of 8,000 units and if production should be decreased at an output level of 9,000units, where does the optimal level of output lie? ___________________________________________________________________________. Click “New Output”. Enter an output level of8,500 units. Click “Results”. Should output be increased or decreased to get to the optimallevel? _________________________________________. Continue clicking “New Output”and entering new outputs to determine the optimal level of production. At this optimal point,what is true about price and marginal cost? __________________________________________.Round off your answer off to the nearest tenth. Show the requested number of iterations belowand indicate whether output should be increased or decreased or if the output is optimal. Again,you need to find the optimal level of output rounded off to the nearest tenth.Output Price Marginal Cost Change in Quantity ______ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ____________________ ______ ____________ ______________Once you have determined the optimal output level, click “Firm Graph” and draw the resultinggraph below. Indicate the current and optimal levels of output. Label all lines and axes.EC 201 Page 4Competition Module Assignment At this point, completely exit the program and restart the Competition module. When you get tothe table entitled, “Firms Short Run Costs”, click “Continue”. Click the button to set the marketprice manually. Enter a price of $13.50 and click “Continue”. Enter an output of 9,396.5 unitsand click