QUESTION 9 With the highly anticipated release of the latest Star Wars film, fan

Question

QUESTION 9 With the highly anticipated release of the latest Star Wars film, fans wish to relive the glory of the previous movies. As a result, a perfectly competitive market for Star Wars DVD box sets has formed George is a producer in this market, and has total fixed costs of $220. Other data relating to costs and output are shown in the table below Quantity Average Variable Cost (box sets)AVC (S/box set) 10 20 30 40 50 7.20 6.50 6.10 5.80 Using this information, calculate wnat quantity George needs to produce so that his average total cost will be S10.20 per box set? Answer to the nearest whole number (with no decimal places) QUESTION 10 Every night, the Yatala Drive-In screens movies can be enjoyed by customers from the comfort of their cars. Assume the market for popcorn is perfectly competitive. Mindy is a producer who sells 32 popcorn buckets, which is her profit maximising outout. At this profit-maximising output level (where theoretically price price is $3.15 per popcorn bucket marginal cost), Mindy's average total cost is $3.20 per popcorn bucket. Her minimum average variable cost is 53.10 per popcorn bucket. The market Answer the following questions (use a negative value if a loss). Answer in dollars, rounded to two decimal places (ie to the nearest cent) a Mindy's economic profit or loss is b. State whether the following statement is true or false: "Mindy's marginal revenue is $3.20 per popcorn bucket." Type T for true, or F for false c. At the current market price, should Mindy shut down? Type Y for Yes, or N for No

Explanation / Answer

9. Fixed cost = 220

Average fixed cost = fixed cost / quantity = 200/Q

It means George needs to produce 50 box sets so that his average total cost (ATC)will be $10.20 per box set.

10. Mindy sells 32 popcorn buckets, it means Q = 32

At this her ATC = $3.20 and the market price is $3.15

A) As at Q = 32, and P = 3.15 which is less than ATC i.e, 3.20 it means Mindy is bearing economic loss because price is less than ATC.

Economic Profit = (P - ATC)*Q = (3.15 - 3.20)*32 = -1.60

as economc profit is negative, it is economic loss.

Ans: -1.60

B) It is false because in the perfect competitive firm P = MR = AR and the price is 3.15 so MR will also $3.15 not $3.20 per popcorn bucket.

Ans - F

C) At current price Mindy should not shut down, it is so because her minimum AC is 3.10 which is less than 3.15 it means that she could earn economic profit if she increase er production and reached at the minimum ATC. So ans is No

quantity (Q) AVC AFC ATC = AFC = AVC 0 - - - 10 8 220/10 = 22 22 + 8 = 30 20 7.20 220/20 = 11 11 + 7.20 = 18.20 30 6.50 220/30 = 7.33 13.83 40 6.10 220/40 = 5.5 11.60 50 5.80 220/50 = 4.4 10.20

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.