1. (25 points) Iggy\'s Ice Cream Shack sells ice cream. The quantity of output (
ID: 1216883 • Letter: 1
Question
1. (25 points) Iggy's Ice Cream Shack sells ice cream. The quantity of output (pounds of ice cream scooped per day) and the corresponding number of workers per day are in the following table: MPL TC MC ATC AVC (workers/day) (Ibs of ice (lbs/worker/ (S) (S/lb) (S/lb) ($/lb) cream/day) 130 160 190 220 250 280 10 5 6 15 20 60 43.33 17.78 13.57 13.75 14.29 15.56 10 6.67 6.43 6 14 16 17.5 4 7.50 8.57 10 5 1.5 6 18 0.5 The Shack is a profit maximizing firm in a perfectly competitive market, and a worker earns $30 per day. Fixed costs come from a 1-year contract for rents paid on the freezers, and are $100 per day. (8 points) In the table above, find the MPL, TC, MC, ATC and AVC. No need to show your work a. ir the market price ofiao tput how your wonk b. (5 points) If the market price of ice cream is $15/pound, how much output would The Shack produce? Calculate the profits at this level of output. Show your workExplanation / Answer
(b) For a perfectly competitive firm, equilibrium is obtained by equating price with MC, i.e. Price = MC = $15.
This holds true when output is 4 units (from the table).
When Q = 4, Profit = Q x (Price - ATC) = 4 x $(15 - 13.75) = 4 x $1.25 = $5
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.