Question #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify your answer using the shut-downrule (relating price and average variable cost)!

Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter11: Profit Maximization
Section: Chapter Questions
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Question #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak
industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin
can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find
Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit
would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify
your answer using the shut-downrule (relating price and average variable cost)!
Transcribed Image Text:Question #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify your answer using the shut-downrule (relating price and average variable cost)!
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