The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs Quantity of Ear Buds MC ($) ATC ($) 5 8.00 10 2.00 5.00 15 2.45 4.15 20 3.55 4.00 25 4.00 4.00 30 5.50 4.25 35 6.00 4.50 40 8.50 5.00 Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds? c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies profit or loss be per week? d. Now assume the market price is $5.50 per pair, and Buddies produces the profit-maximizing quantity of ear buds. What will Buddies profit or loss be per week? e. Buddies earns a normal profit when O O O O marginal cost equals average cost at the minimum of average cost. average cost equals average revenue at the minimum of average cost. marginal cost equals average cost. marginal cost equals marginal revenue at the minimum of marginal cost.
The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per pair. Buddies Production Costs Quantity of Ear Buds MC ($) ATC ($) 5 8.00 10 2.00 5.00 15 2.45 4.15 20 3.55 4.00 25 4.00 4.00 30 5.50 4.25 35 6.00 4.50 40 8.50 5.00 Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places. a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week? pairs b. At the profit-maximizing quantity, what is the total cost of producing ear buds? c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies profit or loss be per week? d. Now assume the market price is $5.50 per pair, and Buddies produces the profit-maximizing quantity of ear buds. What will Buddies profit or loss be per week? e. Buddies earns a normal profit when O O O O marginal cost equals average cost at the minimum of average cost. average cost equals average revenue at the minimum of average cost. marginal cost equals average cost. marginal cost equals marginal revenue at the minimum of marginal cost.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a purely competitive firm that
produces novelty ear buds. Assume the market for novelty ear buds is a competitive market and that the price of ear buds is $6.00 per
pair.
Buddies Production Costs
Quantity of Ear Buds
MC ($)
ATC ($)
5
8.00
10
2.00
5.00
15
2.45
4.15
20
3.55
4.00
25
4.00
4.00
30
5.50
4.25
35
6.00
4.50
40
8.50
5.00
Transcribed Image Text:Instructions: In part a, enter your answer as the closest given whole number. In parts b-d, round your answers to two decimal places.
a. If Buddies wants to maximize profits, how many pairs of ear buds should it produce each week?
pairs
b. At the profit-maximizing quantity, what is the total cost of producing ear buds?
c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies
profit or loss be per week?
d. Now assume the market price is $5.50 per pair, and Buddies produces the profit-maximizing quantity of ear buds. What will
Buddies profit or loss be per week?
e. Buddies earns a normal profit when
O O O O
marginal cost equals average cost at the minimum of average cost.
average cost equals average revenue at the minimum of average cost.
marginal cost equals average cost.
marginal cost equals marginal revenue at the minimum of marginal cost.
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