Assume that the cost data in the top table of the next column are for purely com
ID: 1255358 • Letter: A
Question
Assume that the cost data in the top table of the next column are for purely competitive prices.
b) Answer the questions of 4a assuming product price is $41.( questions for 4a were: At a price of $56 will this firm produce in the short run? If it is preferable to produce what will be the profit maximizing or loss minimizing output? What economic profit or loss will the firm realize per unit of output?)
Total Product
Ave Fix Cost
Ave Variable Cost
Ave Total Cost
Marginal Cost
0
1
$60.00
$45.00
$105
$45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Total Product
Ave Fix Cost
Ave Variable Cost
Ave Total Cost
Marginal Cost
0
1
$60.00
$45.00
$105
$45
2
30
42.5
72.5
40
3
20
40
60
35
4
15
37.5
52.5
30
5
12
37
49
35
6
10
37.5
47.5
40
7
8.57
38.57
47.14
45
8
7.5
40.63
48.13
55
9
6.67
43.33
50
65
10
6
46.5
52.5
75
Explanation / Answer
(b) Yes, $41 exceeds AVC at the loss—minimizing output. Using the MR = MC rule it will produce 6 units. Loss per unit or output is $6.50 (= $41 - $47.50). Total loss = $39 (= 6 * $6.50), which is less than its total fixed cost of $60.
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