A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and p̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What is the firm's minimum average variable cost? a. $8 b. $2 c. $20 d. $6

A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and p̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What is the firm's minimum average variable cost? a. $8 b. $2 c. $20 d. $6

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 1.6CE

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A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and P̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. Suppose that income next year is forecasted to be $10,000 instead. What will the firm’s profit (loss) be? rev: 12_18_2019_QC_CS-192688 Multiple Choice zero $2,500 −$3,550 −$2,860 −$6,000
A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results: Qd = 25,000 − 5,000P + 25M Qs = 240,000 + 5,000P − 2,000P1 where P is price, M is income, and P1 is the price of a key input. The forecasts for the next year are M̂ = $15,000 and p̂1 = $20. Average variable cost is estimated to be AVC = 14 − 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What will the firm's profit (loss) be? a. $26,000 b. $20,000 c. −$6,000, the firm shuts down and loses only its fixed costs. d. $30,000 e. $36,000
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