OUTPUT ------ TFC ---------- TVC 0 $500.00 0.00 1 500.00 70.00 2 500.00 130.00 3
ID: 1091135 • Letter: O
Question
OUTPUT ------ TFC ---------- TVC
0 $500.00 0.00
1 500.00 70.00
2 500.00 130.00
3 500.00 170.00
4 500.00 200.00
5 500.00 300.00
6 500.00 510.00
(a.) Refer to the above data. If the product price is $185 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
(b.) Refer to the above data. If the product price is $200 at its optimal output, will the firm realize an economic profit, break even, or incur an economic loss? How much will the profit or loss be? Show all calculations.
Explanation / Answer
Output TFC TVC Total Cost Price/unit Total Revenue Profit/(loss) 0 500 0 500 0 (500) 1 500 70 570 200 200 (370) 2 500 130 630 200 400 (230) 3 500 170 670 200 600 (70) 4 500 200 700 200 800 100 5 500 300 800 200 1000 200 6 500 510 1010 200 1200 190 The optimal output is 4. The firm will incur an economic loss
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