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(The Short-Run Firm Supply Curve) Use the following data to answer the questions below: Q VC MC AVC 1 $10 ____ ____ 2 $16 ____ ____ 3 $20 ____ ____ 4 $25 ____ ____ 5 $31 ____ ____ 6 $38 ____ ____ 7 $46 ____ ____ 8 $55 ____ ____ 9 $65 ____ ____ a. Calculate the marginal cost and average variable cost for each level of production. b. How much would the firm produce if it could sell its product for $5? For $7? For $10? c. Explain your answers. d. Assuming that its fixed cost is 53, calculate the firm’s profit at each of the production levels determined in part (b).

BuyFind

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536
BuyFind

ECON MICRO

5th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781337000536

Solutions

Chapter
Section
Chapter 8, Problem 4.7P
Textbook Problem
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(The Short-Run Firm Supply Curve) Use the following data to answer the questions below:

Q VC MC AVC
1 $10 ____ ____
2 $16 ____ ____
3 $20 ____ ____
4 $25 ____ ____
5 $31 ____ ____
6 $38 ____ ____
7 $46 ____ ____
8 $55 ____ ____
9 $65 ____ ____

a. Calculate the marginal cost and average variable cost for each level of production.

b. How much would the firm produce if it could sell its product for $5? For $7? For $10?

c. Explain your answers.

d. Assuming that its fixed cost is 53, calculate the firm’s profit at each of the production levels determined in part (b).

Expert Solution
To determine

Complete the table and answer the subparts.

Introduction: Not required.

Explanation of Solution

Output Variable Cost ($) Marginal Cost ($) Average Variable Cost ($)
1 10 10 10
2 16 6 8
3 20 4 6.66
4 25 5 6.25
5 31 6 6.2
6 38 7 6.33
7 46 8 6.57
8 55 9 6.875
9 65 10 9.284

Since, fixed costs are not given, so the total cost is equal to the variable cost.

Marginal Cost: The net addition to the total cost when an additional unit of good is being produced.

MC=TCnTCn1

Variable cost: These cost changes as the output changes...

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