Please show all work. As I have no idea what I am doing. 3. What is the Total Pr
ID: 1123963 • Letter: P
Question
Please show all work.
As I have no idea what I am doing.
3. What is the Total Profit when Q=5?
(A) 25
(B) -25
(C) 75
(D) -75
4. At what point does the Average Total Cost (AVC) curve achieve its minimum?
(A) When Q = 0
(B) When Q = 3
(C) When Q = 5
(D) When Q = 6
5. At what point is profit maximized?
(A) When Q = 5
(B) When Q = 4
(C) When Q = 7
(D) None of the above
6. Should this firm continue to operate?
(A) It should shut down
(B) It should continue to operate
(C) It is indierent between continuing to operate, and shutting down
(D) It's really a matter of perspective, foo!
The next 4 questions involve the following Table, which describes a perfectly competitive firm: Quantity (Q) Price (P) Fixed Cost (FC)Variable Cost (VC) 0 30 50 60 68 80 100 130 165 220 50 50 31 31 31 31 31 31 31 31 31 31 0 2 3 6 9Explanation / Answer
Since Fixed cost does not vary with output, Fixed cost = 50 across all output levels.
Total revenue (TR) = P x Q
Total cost (TC) = FC + VC
Profit = TR - TC
AVC = VC / Q
These are computed as follows.
Therefore:
(3) (A)
(4) (C)
AVC is minimum (= 16) when Q = 5.
(5) (C)
(6) (B)
When firm produces 4 or more units, it makes positive profits. So firm will continue to operate.
Q P TR FC VC AVC TC PROFIT 0 31 0 50 0 50 -50 1 31 31 50 30 30 80 -49 2 31 62 50 50 25 100 -38 3 31 93 50 60 20 110 -17 4 31 124 50 68 17 118 6 5 31 155 50 80 16 130 25 6 31 186 50 100 16.67 150 36 7 31 217 50 130 18.57 180 37 8 31 248 50 165 20.63 215 33 9 31 279 50 220 24.44 270 9Related Questions
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