2nd Edition

ISBN: 9781680922219

Author: Timothy Taylor, Steven A Greenlaw, David Shapiro

Publisher: MCGRAW-HILL HIGHER EDUCATION

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Textbook Question

Chapter 8, Problem 41CTQ

A computer company produces affordable, easy-to-use home computer systems and has fixed costs of $ 25 0 .

The marginal cost of producing computers is $ 7 00 for the first computer, $ 25 0 for the second, $ 3 00 for the third, $ 35 0 for the fourth, $ 43 0 for the fifth, $ 45 0 for the sixth, and $ 5 00 for the seventh.

Create a table that shows the company’s output, total cost, marginal cost, average cost, variable cost, and average variable cost.
At what price is the zero-profit point? At what price is the shutdown point?
If the company sells the computers for $ 5 00 , is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
If the firm sells the computers for $ 3 00 , is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.

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Chapter 8, Problem 40CTQ

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