2) Kate's Catering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. (CL04)(U) Quantity of meals 0 VC 0 10 200 20 300 30 480 40 40 700 50 131 1,000 a) Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. b) What is the relationship Between Average cost (AC) and Marginal cost (MC) curve? Explain with diagram? c) Why AC curve is U shaped? Explain with diagram? d) What is the break-even price and quantity? What is the shut-down price and quantity? e) Suppose that the price at which Kate can sell catered meals is $21 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down?

2) Kate's Catering provides catered meals, and the catered meals industry is perfectly competitive. Kate's machinery costs $100 per day and is the only fixed input. Her variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table. (CL04)(U) Quantity of meals 0 VC 0 10 200 20 300 30 480 40 40 700 50 131 1,000 a) Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. b) What is the relationship Between Average cost (AC) and Marginal cost (MC) curve? Explain with diagram? c) Why AC curve is U shaped? Explain with diagram? d) What is the break-even price and quantity? What is the shut-down price and quantity? e) Suppose that the price at which Kate can sell catered meals is $21 per meal. In the short run, will Kate earn a profit? In the short run, should she produce or shut down?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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