Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9, Problem 1.3P
To determine
The total revenue, total cost and fixed cost.
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The table gives some of the costs of the Delicious Pie Company. The marginal cost per pie of increasing the output of pies from 100 to 200 is
Total
variable cost
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Output
(pies)
0
100
200
300
400
$8.00
$600
$6.00
$5.00
0
400
1,000
1,800
2,800
Total cost
(dollars)
300
700
1300
2100
3100
?
In tourist towns such as Myrtle Beach, some businesses stay open year round while others close.
How do fixed and variable costs affect their decision to close or stay open? (Review "The Shutdown Point" chapter 8).
Write your response below.
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Under what conditions will a firm shut down temporarily? Explain theoretically and graphically.
Chapter 9 Solutions
Principles of Economics (12th Edition)
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- The following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 d) Is the price $8 a short-run or long-run equilibrium price for the industry? If the price is not a long run equilibrium price, what adjustments are likely to happen in the market for it to reach long run equilibrium. e) What price must prevail in the market for a typical firm to operate in the short run? At this price, how many ice tea will be supplied by all firms in the market?arrow_forwardThe following are the cost information of a typical ice tea company in an industry with 100 firms. Output (ice tea per hour) Marginal Cost ($ per ice tea) Average Variable Cost ($ per ice tea) Average Total Cost ($ per ice tea) 3 2.50 4.00 7.33 4 2.20 3.53 6.03 5 1.90 3.24 5.24 6 2.00 3.00 4.67 7 2.91 2.91 4.34 8 4.25 3.00 4.25 9 8.00 3.33 4.44 a) At the price of $2.20 per ice tea, what is the firm’s profit maximizing level of output? Why is this the profit maximizing level of output for the firm? b) If the market price is $8 per ice tea and the firm is producing six (6) ice tea per hour, is the firm maximizing profit or not? Why or why not? If the firm is not maximizing profit, what should it do to maximize profit? c) At the price of $8 per ice tea, what is the firm’s profit-maximizing level of output? Why is this the profit maximizing level of output? What is the firm’s economic profit at…arrow_forwardMatthew Rafferty produces hiking boots in the perfectly competitive hiking boot market. The table contains information on Rafferty's total costs. Fill in the missing values for AFC, AVC, ATC, and MC in the table. (Enter your responses rounded to two decimal places.) Output per Week 0 1 2 3 4 5 6 7 8 9 10 Total Cost $400.00 500.00 580.00 640.00 705.00 775.00 850.00 960.00 1080.00 1215.00 1400.00 AFC $ AVC $ BE 172 ATC $ IND MC $arrow_forward
- Matthew Rafferty produces hiking boots in the perfectly competitive hiking boot market. The table contains information on Rafferty's total costs. Fill in the missing values for AFC, AVC, ATC, and MC in the table. (Enter your responses rounded to two decimal places.) Output per Week 0 1 2 3 4 6 7 8 9 10 Total Cost $245.00 345.00 395.00 435.00 485.00 545.00 615.00 700.00 800.00 920.00 1065.00 AFC AVC ATC MCarrow_forwardQuestion #1: Perfect Competition Kevins Kayak Company produces kayaks. Assume that the kayak industry is perfectly competitive. The firm has a total cost function of TC(Q) = 240,10 12875 4 Q+. Kevin can sell all the kayaks he produces for $1,200 each.(a) How many kayaks should Kevin produce (i.e., find Q)? (b) Calculate the ATC if Kevin produced at the output level you found in Part (a)? (b) How much profit would Kevin make at the output level found in Part (a)? (c) Should Kevin stay in business? You must justify your answer using the shut-downrule (relating price and average variable cost)!arrow_forwardBased on the table above which shows Chip's costs, if Chip shuts down in the short run, his average variable costs will bearrow_forward
- I was wondering I could get help with the question below? Thanks in advance! A firm has three different production facilities, all of which produce the same product. While reviewing the firm’s cost data, Jasmin, a manager, discovers that one of plants has a higher average cost than the other plants and suggests closing this plant. Another manager, Joshua, notes that the high-cost plant has high fixed costs but the that the marginal cost in this plant is lower than in the other plants. He says that the high-cost plant should not be shut down but should expand its operations. Who is right?arrow_forwardImagine a small juice producer named " Bilberry Infused Beverages" known for its refreshing beverages. The owner, Louis, keeps track of the production costs. Recently he decided to expand his operations and produce more Juices to meet the increasing demand. Table 15.1 below shows the data he has collected: Complete Table 15.1 below and use the information to answer the question that follows. Table 15:1 Production Costs for Bilberry Infused Beverages Output Total cost Fixed cost Variable cost Marginal Average cost cost Average fixed cost D 30 0 1 10 2 18 3 22 4 56 6 5 64 6 76 7 8 15 15 What is the marginal cost of producing the 8th unit of the good? a) 4 b) 10 12 d) 29arrow_forwardlooking for help with my online homework question, it is not a graded assignment so I'm not sure why it was rejected previously. thank you.arrow_forward
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