Peter runs a small local newspaper company. He can sell a newspaper at $2. He has fixed costs of $10,000. His variable costs are $1,500 for the first thousand newspapers, $1000 for the second thousand, and then $600 for each additional thousand newspaper. i.What is his average fixed cost per newspaper (not per thousand!) if he prints 1000 newspaper? 2000? 10,000?  ii.What is his average variable cost per newspaper if he prints 1000? 2000? 10,000? iii.What is his average total cost per newspaper if he prints 1000? 2000? 10,000?iv.  Can he make profit at current market price? What is the breakeven price in this business (assuming maximum production at 10,000 newspaper)?

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A:

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Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.