A manufacturer of electric switches in a competitive industry has a fixedmonthly cost of $50,000, total monthly variable cost $100,000, and marginalcost of $5. What is the profit if the monthly production is 100,000 units?Assuming that prices of switches fluctuate from month to month, what is the lowest price the manufacturer can accept in order to stay in business in the long run and in the short run. Will those prices be the same? Show detail work
A manufacturer of electric switches in a competitive industry has a fixedmonthly cost of $50,000, total monthly variable cost $100,000, and marginalcost of $5. What is the profit if the monthly production is 100,000 units?Assuming that prices of switches fluctuate from month to month, what is the lowest price the manufacturer can accept in order to stay in business in the long run and in the short run. Will those prices be the same? Show detail work
Chapter12: Firms In Perfectly Competitive Markets
Section: Chapter Questions
Problem 9P
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Question
A manufacturer of electric switches in a competitive industry has a fixed
monthly cost of $50,000, total monthly variable cost $100,000, and marginal
cost of $5. What is the profit if the monthly production is 100,000 units?
Assuming that prices of switches fluctuate from month to month, what is the lowest price the manufacturer can accept in order to stay in business in the long run and in the short run. Will those prices be the same?
Show detail work
Expert Solution
Step 1
Given:
MC=$5
Fixed Cost=$50,000
Total monthly variable cost=$100,000
Monthly Production=100,000units
Now,
TC=FC+VC
TC=50,000+100,000
TC=$150,000
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