Jeannette has a wheat farm, and the wheat market is perfectly competitive. The market price of a bushel of wheat is $18, and Jeannette’s machinery costs $140 per day and is the only fixed input. Her variable cost consists of the wages paid to the farm workers, and the fertilizer. The variable cost per day associated with each level of output is given by the table below. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. What is the break-even price and quantity? What is the shut-down price and quantity? If the price at which Jeannette can sell wheat is $16/bu., will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $12, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $8, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? Q VC TC MC AVC ATC 0 0 10 160 20 220 30 300 40 420 50 580 60 780 70 1,020

Jeannette has a wheat farm, and the wheat market is perfectly competitive. The market price of a bushel of wheat is $18, and Jeannette’s machinery costs $140 per day and is the only fixed input. Her variable cost consists of the wages paid to the farm workers, and the fertilizer. The variable cost per day associated with each level of output is given by the table below. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. What is the break-even price and quantity? What is the shut-down price and quantity? If the price at which Jeannette can sell wheat is $16/bu., will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $12, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $8, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? Q VC TC MC AVC ATC 0 0 10 160 20 220 30 300 40 420 50 580 60 780 70 1,020

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.4P

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Question

Jeannette has a wheat farm, and the wheat market is perfectly competitive.

The market price of a bushel of wheat is $18, and Jeannette’s machinery costs $140 per day and is the only fixed input.

Her variable cost consists of the wages paid to the farm workers, and the fertilizer. The variable cost per day associated with each level of output is given by the table below.

Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output.

What is the break-even price and quantity?

What is the shut-down price and quantity?

If the price at which Jeannette can sell wheat is $16/bu., will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?

If the price at which Jeannette can sell wheat is $12, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?

If the price at which Jeannette can sell wheat is $8, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?

Q	VC	TC	MC	AVC	ATC
0	0
10	160
20	220
30	300
40	420
50	580
60	780
70	1,020

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