Question 11 Price/Cost 50 40 30 20 10 ATCAVC 10 20 30 40 Quantity 50 Figure 9.6 At a market price of $20, this perfectly competitive firm should produce approximately ____ units. 30 35 40 45

How does fixed cost affect marginal cost? Why is this relationship important?

Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?

A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.