Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the short run, assume the marginal cost of building new homes equals the market price of a new home when Bob builds 10 new homes. At this level of output, Bob's average fixed cost of building a new home is $210,000 and his average variable cost is $200,000 per home (so his average total cost is $410,000 per home). If new homes are selling for $190,000, should he continue to produce 10 new homes in the short run or shut down?
Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the short run, assume the marginal cost of building new homes equals the market price of a new home when Bob builds 10 new homes. At this level of output, Bob's average fixed cost of building a new home is $210,000 and his average variable cost is $200,000 per home (so his average total cost is $410,000 per home). If new homes are selling for $190,000, should he continue to produce 10 new homes in the short run or shut down?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter7: Production, Costs, And Industry Structure
Section: Chapter Questions
Problem 8SCQ: Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are...
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Hello! Could I get this question written out and explained, step by step? Thank you so much.
![Bob is a general contractor in the construction industry.
Suppose the construction industry is perfectly competitive. In
the short run, assume the marginal cost of building new homes
equals the market price of a new home when Bob builds 10
new homes. At this level of output, Bob's average fixed cost of
building a new home is $210,000 and his average variable cost
is $200,000 per home (so his average total cost is $410,000
per home). If new homes are selling for $190,000, should he
continue to produce 10 new homes in the short run or
shut down?
In the short run, Bob should
your response as a whole number.)
and lose $
(Enter](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd524c353-1214-4780-ae6a-4868b2895696%2F3cc9537d-f909-485a-9161-cce6007a91cd%2Fvvbazrk_processed.png&w=3840&q=75)
Transcribed Image Text:Bob is a general contractor in the construction industry.
Suppose the construction industry is perfectly competitive. In
the short run, assume the marginal cost of building new homes
equals the market price of a new home when Bob builds 10
new homes. At this level of output, Bob's average fixed cost of
building a new home is $210,000 and his average variable cost
is $200,000 per home (so his average total cost is $410,000
per home). If new homes are selling for $190,000, should he
continue to produce 10 new homes in the short run or
shut down?
In the short run, Bob should
your response as a whole number.)
and lose $
(Enter
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