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 $6.00 per pair. Buddies Production Costs Quantity MC ATC of Ear Buds ($) ($) 9.00 10 2.00 5.50 15 2.44 4.48 20 3.56 4.25 25 4.50 4.30 30 5.02 4.42 35 5.96 4.64 40 8.56 5.13
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 $6.00 per pair. Buddies Production Costs Quantity MC ATC of Ear Buds ($) ($) 9.00 10 2.00 5.50 15 2.44 4.48 20 3.56 4.25 25 4.50 4.30 30 5.02 4.42 35 5.96 4.64 40 8.56 5.13
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter11: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 14CQ
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Question
![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 $6.00 per
pair.
Buddies Production Costs
Quantity
MC
АТС
of Ear Buds
($)
($)
9.00
-
10
2.00
5.50
15
2.44
4.48
20
3.56
4.25
25
4.50
4.30
30
5.02
4.42
35
5.96
4.64
40
8.56
5.13
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 $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies
profit or loss be per week?
2$
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
average cost equals average revenue at the minimum of average cost.
O marginal cost equals average cost.
O marginal cost equals marginal revenue at the minimum of marginal cost.
O marginal cost equals average cost at the minimum of average cost.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F506f122c-661f-4421-995d-0e6019de4161%2Fd1d2628c-3c11-406d-9235-565b7a7fe5c3%2Ffpgm5wh_processed.png&w=3840&q=75)
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 $6.00 per
pair.
Buddies Production Costs
Quantity
MC
АТС
of Ear Buds
($)
($)
9.00
-
10
2.00
5.50
15
2.44
4.48
20
3.56
4.25
25
4.50
4.30
30
5.02
4.42
35
5.96
4.64
40
8.56
5.13
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 $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what will Buddies
profit or loss be per week?
2$
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
average cost equals average revenue at the minimum of average cost.
O marginal cost equals average cost.
O marginal cost equals marginal revenue at the minimum of marginal cost.
O marginal cost equals average cost at the minimum of average cost.
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