Farmer Brown grows blueberriesThe average total cost, average variable cost, and
ID: 1152718 • Letter: F
Question
Farmer Brown grows
blueberriesThe average total cost, average variable cost, and marginal cost of growing
blfueberriesor an individual farmer are illustrated in the graph to the right.
Farmer Brown will incur losses if the market price falls below$___20___
per crate. (Enter a numeric response using an integer.)
Furthermore, farmer Brown should shut down in the short run if the market price falls below__16___ $nothing
per crate.
401 36 32 CO 28 2 24 M 8 ATC AVC O 20 8 16 D 12 4 0 10 20 30 40 50 60 70 80 90 100 Quantity of blueberries (crates per week)Explanation / Answer
Generally, ATC is considered as the break even point. That price where ATC is equal to price of the product. Here the firm recovers both FC as well as VC.
When market price is below the ATC then firm makes negative economic profit but it continues to produce in the short run. Because the firm is able to recover variable cost.
In the short run the firm must shut down its production activity as soon as price goes below the Minimum AVC.
Farmer brown will incur losses if market price goes below $22 per crate.
Farmer Brown should shut down in the short run if the market price falls below $18 per crate.
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