A new production technology for making vitamins is invented by a college profess

Question

A new production technology for making vitamins is invented by a college professor who decides not to patent it. Thus, it is available for anybody to copy and put into use. The TC per bottle for production up to 100,000 bottles per day is given in the following table Instructions: In part a, enter your responses in the gray-shaded cels and round your answers to 2 decimal places. In parts c and d, enter your answers as whole numbers a. What is ATC for each level of output listed in the table? Output TC ATC 25,000.00 50,000.00 75,000.00 70,000.00 90,000.00 95,000.00 100,000.00 100,000.00 S b. Suppose that for each 25,000-bottle-per-day increase in production above 100,000 bottles per day, TC increases by S5,000 (so that, for instance, 125,000 bottles per day would generate total costs of S105,000 and 150,000 bottles per day would generate total costs of $110,000). Is this a decreasing-cost industry? (Cick to select) c. Suppose that the price of a bottle of vitamins is $1.73 and that at that price the total quantity demanded by consumers is 75,000,000 botles How many firms will there be in this industry? firm(s) d. Review your answers to parts b and C. Does the level of demand determine this industry's market structure? [Click to select)

Explanation / Answer

a) Output = 25,000 TC = $70,000 , ATC = 70000/25000 = 2.8

Output =50,000 TC = $ 90,000, ATC = 50000/90000 = 0.55

Output = 75,0000 TC =$ 95,000 ATC = 75000/95000 = 0.78

Output = 100,000 TC = $ 100,000 ATC = 100000/100000 = 1

b) No it is a increasing cost industry Because average total cost increases with incraese in output.

ATC = 125000/105000 = 1.19 ATC = 150000/110000 = 1.36

c) Number of firms = 75,000,000/100000 = 750

d) Yes level of demand determines the structure of this industry

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