A price taking firm has zero fixed cost and increasing marginal cost. What quantity does it produce? Are its profits zero? Explain your answer.
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- A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.What two lines on a cost curve diagram intersect at the zero-profit point?Small Mom and Pop firms, like inner city grocery stores, sometimes exist even though they do not earn economic profits. How can you explain this?
- Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect me lung-nm average cost curve of a firm? Can you draw the old curve and the new one on the same axes? How might such an improvement affect other firms in the industry?i. Calculate the marginal cost, marginal revenue and profit for each unitof production. ii. How many units should the firm produce to maximise profit?
- (A) what were the fixed costs of production for the firm? (B) at what rate of output was profit computer maximized?(choose the highest output level.) (C) at what output rate was total profit maximized? Computers per monthBall Bearings, Inc. faces costs of production as follows:Table 1: Ball Bearing Inc. Production CostsQuantity Total Fixed Cost Total Variable Cost0 100 01 100 502 100 703 100 904 100 1405 100 2006 100 360(a.) Calculate the company’s average fixed costs, average variable costs, average total costs, and marginal costsat each level of production.(b.) The price of a case of ball bearings is 50. Seeing that she can’t make a profit, the Chief Executive Officer(CEO) decides to shut down operations. What are the firm’s profits/ losses? Was this a wise decision?Explain.(c.) Vaguely remembering his introductory economics course, the Chief Financial Officer tells the CEO it isbetter to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity.Question 4Charlie Co. sells pastries and its production and cost table is given below. A worker costs $100 a day, the firm has fixed costs of $200.L Q MP MC TC ATC0 01 202 503 904 1205 1406 1507 155a. Complete the table above b. Compare the average total cost and the marginal cost and explain therelationship c. Describe the methods that can be used to determine where profit is maximized?
- Farmer McDonald gives banjo lessons for $20 an hour. One day, he spends10 hours planting $100 worth of seeds on his farm. What opportunity cost has he incurred?What cost would his accountant measure? If these seeds yield $200 worth of crops, doesMcDonald earn an accounting profit? Does he earn an economic profit?why do the moddenn day firms focus non economic objectives. explainCharlie Co. sells pastries and its production and cost table is given below. A workercosts $100 a day, the firm has fixed costs of $200.L Q MP MC TC ATC0 01 202 503 904 1205 1406 1507 155a. Complete the table above [7 marks]b. Compare the average total cost and the marginal cost and explain therelationship [3 marks]c. Describe the methods that can be used to determine where profit is maximized?[3 marks]
