In: Economics
Consider total cost and total revenue, given in the following table:
In the final column, enter profit for each quantity. (Note: If the firm suffers a loss, enter a negative number in the appropriate cell.)
Problems and Applications Q4 Ball Bearings, Inc., faces costs of production as follows:
Complete the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production.
The price of a case of ball bearings is $50. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations. The firm's profit in this case is . (Note: If the firm suffers a loss, enter a negative number in this cell.) True or False: This was a wise decision. True False Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. At this level of production, the firm's profit is . (Note: If the firm suffers a loss, enter a negative number in this cell.). True or False: This is the best decision the firm can make. True False Grade It Now Save & Continue Continue without saving |
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In order to maximize profit, how many units should the firm produce? Check all that apply.
4
5
6
7
In the previous table, enter marginal revenue and marginal cost for each quantity.
On the following graph, use the green points (triangle symbol) to graph the marginal-revenue curve, then use the orange points (square symbol) to plot the marginal-cost curve. (Note: Be sure to plot from left to right and to plot between integers. For example, if the marginal cost of increasing production from 1 unit to 2 units is $5, then you would plot a point at (1.5, 5).)
Marginal RevenueMarginal Cost01234567109876543210Revenue and CostsQuantity
The marginal-revenue curve and the marginal-cost curve cross at a quantity .
This firm in a competitive industry, because marginal revenue is as quantity increases.
True or False: The industry is in a long-run equilibrium.
True
False
price=$50 and CEO decides to shut.
Profit= -$100
False-
This was not a wise decision as firm will suffer loss of $100 after shutting down. Instead if it produced 4 units, it will suffer a loss of $40.
When MC=MR, Q=1.
Profit=-$100
False-
This is not the best decision of the firm as loss is not minimized.
● 4 units
reason- At Q=4, loss is minimized. Loss =-$40.
The marginal-revenue curve and the marginal-cost curve cross at a quantity =4.
This firm IS in a competitive industry, because marginal revenue is SAME as quantity increases.
False:
The industry is not in a long-run equilibrium. As P is not equal to minimum of ATC.