costs are given in the following table. At what price will they earn zero profits? Output D O $5 O $7 0 1 2 3 4 $3 5 6 $10 Variable Cost $0 $7 $10 $15 $24 $40 $60
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- What is die difference between accounting and economic profit?Return to Figure 7.7. What is the marginal gain in output from increasing the number of batters from 4 to 5 and from 5 to 6? Does it continue the pattern of diminishing marginal returns? Figure 7.7 How output Affects Total costs3. The fixed costs incurred by a small genetics research lab are $200,000 per year. Variable costs are $12,500 per research project.a. If the revenue per project is $30,000, what is the breakeven number of projects of this lab in a year to sustain its operations?b. Currently, the lab works on 20 projects a year. What is their profit at this level?c. If variable costs increase to $13,000 per research project, what is the new BEP? By how much will their profit increase or decrease?
- Bakery produces and sells grain bread. Monthly fixed costs are known, costs of raw materials and direct labour needed to bake one bread are given below as well. Calculate costs of raw material and direct labour needed to produce more pieces of bread. Then calcuate VC, TC, AC and MC. Quantity Fixed costs (EUR) Raw material costs (EUR) Direct labour costs (EUR) Variable costs (EUR) Total costs (EUR) Average costs (EUR) Marginal costs (EUR) 1 500.00 0.20 1.00 1.20 501.20 501.20 1.20 5 500.00 1.00 5.00 6.00 506.00 101.20 1.20 10 500.00 2.00 10.00 12.00 512.00 51.20 1.20 15 500.00 3.00 15.00 18.00 518.00 34.53 1.20 35 500.00 7.00 35.00 42.00 542.00 15.49 1.20 50 500.00 10.00 50.00 60.00 560.00 11.20 1.20 100 500.00 20.00 100.00 120.00 620.00 6.20 1.20 1,000 500.00 200.00 1,000.00 1,200.00 1,700.00 1.70 1.20 2,500 500.00 500.00 2,500.00 3,000.00 3,500.00 1.40 1.20 10,000 500.00 2,000.00 10,000.00 12,000.00 12,500.00 1.25 1.20Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $250. Her variable costs are $1,000 for the first thousand posters, $800 for the second thousand, and then $750 for each additional thousand posters. What is her AFC per poster (not per thousand!) if she prints 1,000 posters? 2,000? 10,000? What is her ATC per poster if she prints 1,000? 2,000? 10,000? If the market price fell to 70 cents per poster, would there be any output level at which Karen would not shut down production immediately?A computer company produces affordable, easy-to-use home computer systems and has fixed costs of $250. The marginal cost of producing computers is as indicated below. Output Fixed Cost Variable Cost Total Cost Marginal Cost Average Cost Average Variable Cost 1 $250 $700 $950 $700 2 $250 $925 $1175 $225 3 $250 $315 4 $250 $360 5 $250 $400 6 $250 $450 7 $250 $550 If the company sells the computers for $550, is it making a profit or a loss? How big is the profit or loss? If the firm sells the computers for $315, is it making a profit or a loss? How big is the profit or loss? We expect the marginal cost to increase as this firm produces more computers. But when the firm shifts from producing 1 to 2 computers, marginal cost falls. What might explain this?
- Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. Your aunt’s opportunity costs comprise * If your aunt thought she could sell $510,000 worth of merchandise in a year, what is your aunt’s accounting profit? *$10,000-$40,000$460,000$0Given the above situation, what is your aunt’s economic profit? *$10,000-$40,000$460,000$0ABC Company produces 100 pendants per day. The total fixed cost for the plant is $5000 and the total variable cost is $15000 per day. Calculate the average fixed cost, average variable cost, average total cost and total cost at the current output level. b. Calculate Economic profit and Accounting profit from the figures given below for ABC Company. (3 marks) • Total revenue $ 500,000 • Wages and salaries $ 40,0000 • Forgone salary $ 80,000 • Interest paid $ 10,000 • Forgone rent $ 10,000 • Raw materials $ 50,000 • Other payments $ 20,000 • Forgone interest $ 7,000ACME Coal paid $5,000 to lease a railcar from the Reading Railroad. Under the terms of the lease, $1,000 of this payment is refundable if the railcar is returned within two days of signing the lease. 1. Upon signing the lease and paying $5,000, how large are ACME’s fixed costs? Its sunk costs? 2. One day after signing the lease, ACME realizes that it has no use for the railcar. A farmer has a bumper crop of corn and has offered to sublease the railcar from ACME at a price of $4,500. Should ACME accept the farmer’s offer?
- Q3_A The Break even Analysis of firm show that: BEP = 1000 FC = 10,000 $ P = 3% of the quantity of zero profit. A) The point of intersection of TR with TC is at the cost point of $ 45,000 for TR. B) At the point where (zero units sold) TC equals $ 5,000 C) the start of the line drawing for TR is at cost point $ 0 D) the value UVC for the product in question equals $ 10) E)the FC value in a point for BFP equals $ 10,000 For the given choices, showing which one is True and which one is False, correcting the False ones and given a reasonable reason for the True. Write your answer below:(Figure: Costs of Oil Production) Refer to the figure. Assuming that price equals marginal cost, the total cost of producing eight barrels of oil is: It cannot be determined from the information given. $400. $240. $60.Suppose a food company has both food and store divisions. The food divisionproduces burgers that are sold downstream at the store. Assume that the storesells 1,000 burgers at $10, 2,000 burgers at $9, 3,000 at $8, and so on up to10,000 burgers at $1. The price the food division charges for a burger is$3.50. What will be the profit-maximizing price for the entire company? How muchprofit will the company make? What is the revenue-maximizing quantity for thestore?