Why the average fixed cost (AFC) continuously declines.

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How do you create a concave production possibilites curve graph?

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Chapter 21, Problem 8QP

To determine

Why the average fixed cost (AFC) continuously declines.

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How do you create a concave production possibilites curve graph?

After viewing the film Back to the Future, Matt takes a nap but has a disturbing dream. He sees himself 50 years into the future, and his town has become a large city. Dozens of computer businesses exist in the city. However, he is still selling only 1200 computers a year at his store. He observes that computer prices are now $900 and his ATC is still $1000. His AVC is $750 and his AFC is $250. In a panic, Matt closes his store immediately rather than continue to lose money. Did he do the right thing? Why, or why not? Illustrate numerically to support your answer. In desperation, Matt considers raising his price back to the $1,300 that he charged in the “good old days.” Without any more information than the fact that computers now sell in a perfectly competitive market, can you tell Matt what the outcome of his price change will be? Perplexed about whether his proposed action is the right approach and uncertain about your advice, Matt calls in a consultant who tells him that he…

The supply and demand for a computer in a store are given for two prices: for a price of $800, the demand quanity is 50 and the supply quanity 230: for a price of $50, the demand quanity is 150 and the supply quantity 150. Let a represent the quanity A. Write an equation representing the demand function B. Write an equation representing the supply function C. Find the equlibrium quantity and price