You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following data at his present level of production: Output = 1250 pounds, market price = $2.00, total cost =$7500, fixed cost3D$5625, marginal cost=$2. The minimum of AVC occurs at {1000 pounds at $1} and the minimum of ATC at {1600 pounds at $4}. Please help Jack with the following questions based on the above figures: (a) Is Jack making positive profit? Please calculate total profit/loss (b) Draw a graph for the raw cotton market and a graph for Jack's farm current situation that includes MC, ATC, and AVC, labeling all relevant points on axes with numerical values. Label the total profit/loss area (c) What is the average variable cost at the profit maximizing quantity of 1250? (d) Suppose more farmers exit the raw cotton market until the market price is $3.00 per pound. On the same graphs in (b) above, show the effect of this change in the market price

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following
data at his present level of production: Output = 1250 pounds, market price = $2.00, total cost =$7500, fixed cost=D$5625,
marginal cost=$2. The minimum of AVC occurs at {1000 pounds at $1} and the minimum of ATC at {1600 pounds at $4}. Please
help Jack with the following questions based on the above figures:
(a) Is Jack making positive profit? Please calculate total profit/loss
(b) Draw a graph for the raw cotton market and a graph for Jack's farm current situation that includes MC, ATC, and AVC, labeling
all relevant points on axes with numerical values. Label the total profit/loss area
(c) What is the average variable cost at the profit maximizing quantity of 1250?
(d) Suppose more farmers exit the raw cotton market until the market price is $3.00 per pound. On the same graphs in (b) above,
show the effect of this change in the market price
A-
!!
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Transcribed Image Text:You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following data at his present level of production: Output = 1250 pounds, market price = $2.00, total cost =$7500, fixed cost=D$5625, marginal cost=$2. The minimum of AVC occurs at {1000 pounds at $1} and the minimum of ATC at {1600 pounds at $4}. Please help Jack with the following questions based on the above figures: (a) Is Jack making positive profit? Please calculate total profit/loss (b) Draw a graph for the raw cotton market and a graph for Jack's farm current situation that includes MC, ATC, and AVC, labeling all relevant points on axes with numerical values. Label the total profit/loss area (c) What is the average variable cost at the profit maximizing quantity of 1250? (d) Suppose more farmers exit the raw cotton market until the market price is $3.00 per pound. On the same graphs in (b) above, show the effect of this change in the market price A- !! 三 U X2 x2 </> の étv MacBook Pro G Search or type URL +,
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