Question 4 Pizza Inn Company Ltd is a new company in Accra that produces pizza, Lasagna, and Spaghetti Bolognese. The table below shows the production costs for the company. Use the table to answer the questions below Table 1: Cost for Producing Pizza Quantity Total Fixed Total Cost (TFC) Variable Cost (TVC) 1 2 3 4 5 6 60 60 60 60 60 60 Total Average Average Average Marginal Cost Fixed Cost Variable Cost Cost (TC) (AFC) (AC) (MC) 90 100 105 115 135 180 Cost (AVC) a) Fill in the cost table for Pizza Inn Company Ltd b) If the Pizza Inn operates under Perfect Competition and the market price is 20 (i.e. P=Gh20) what is the profit maximizing output level from the table c) Is this firm in the short run or long run and why? d) At the profit maximizing output level (found in A), is the firm making profit or loss; and what is the value of this profit or loss e) From your answer for D, should the firm shut down or continue to operate and why? (5 marks) f) Why is it that the Average Variable Cost tends to get closer to the Average Cost as the level of output (Quantity) increases?

Question 4 Pizza Inn Company Ltd is a new company in Accra that produces pizza, Lasagna, and Spaghetti Bolognese. The table below shows the production costs for the company. Use the table to answer the questions below Table 1: Cost for Producing Pizza Quantity Total Fixed Total Cost (TFC) Variable Cost (TVC) 1 2 3 4 5 6 60 60 60 60 60 60 Total Average Average Average Marginal Cost Fixed Cost Variable Cost Cost (TC) (AFC) (AC) (MC) 90 100 105 115 135 180 Cost (AVC) a) Fill in the cost table for Pizza Inn Company Ltd b) If the Pizza Inn operates under Perfect Competition and the market price is 20 (i.e. P=Gh20) what is the profit maximizing output level from the table c) Is this firm in the short run or long run and why? d) At the profit maximizing output level (found in A), is the firm making profit or loss; and what is the value of this profit or loss e) From your answer for D, should the firm shut down or continue to operate and why? (5 marks) f) Why is it that the Average Variable Cost tends to get closer to the Average Cost as the level of output (Quantity) increases?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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