Question

In: Economics

The table below shows the costs of a firm that produces handmade pottery vases in a...

The table below shows the costs of a firm that produces handmade pottery vases in a competitive industry.

Output AVC MC
1 3 3
2 2.50 2
3 2.17 1.5
4 1.93 1.2
5 1.74 1
6 1.67 1.3
7 1.71 2
8 2 4
9 2.44 6
10 3 8


The market price for a handmade vase is $4.50. To maximize its profit, this firm should produce    vases.

Solutions

Expert Solution

If there is no output at which price equals the marginal cost in explicit manner then it produce up to that level of output at which price exceeds

the marginal cost. The market price is $4.50 per vase. The given table shows that the market price exceeds the marginal cost up to production of 8 vases.

So,To maximize its profit, this firm should produce 8 vases.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses...
Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $30,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year: Vases Figurines Price $40 $70 Variable cost 30 42 Contribution margin $10 $28 Number of units 1,000 500 Required: 1. Compute the number of vases and...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $40,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year: Vases Figurines Price $40 $70 Variable cost 30 42 Contribution margin $10 $28 Number of units 1,000 500 Required: If required, round your final...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $30,000. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year: Vases Figurines Price $40 $70 Variable cost 30 42 Contribution margin $10 $28 Number of units 1,000 500 Required: 1. Compute the number of...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each...
Multiple-Product Breakeven Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $38,400. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year: Vases Figurines Price $40 $70 Variable cost 30 42 Contribution margin $10 $28 Number of units 1,000 500 Required: If required, round your final...
The table below shows two cigarette manufacturers (Firm A and Firm B) that are faced with...
The table below shows two cigarette manufacturers (Firm A and Firm B) that are faced with lawsuits from states to recover the healthcare related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by cigarette manufacturers and thus will have difficulty recovering full costs without the help of at least one cigarette firm study. Each firm...
Q3: a) The following table shows some costs of a typical firm that operates in a...
Q3: a) The following table shows some costs of a typical firm that operates in a perfectly competitive industry where the market price (P*) is $20 per unit. Complete the following table. Show values to 2 decimal places if they are not whole numbers. Hint: Start with the first row. Q (units) TFC TVC TC AFC AVC ATC MC TR AR MR 0 $60 – – – – – – 1 $15 2 $12.50 3 $31 4 $44 5 $11.80...
Problem 3 Table 1 below shows an incomplete table of costs for a company. Use the...
Problem 3 Table 1 below shows an incomplete table of costs for a company. Use the definitions of these costs and how they are related to complete the missing cells of this table. For each cell you fill in, explain how you are able to determine the value of that cost. Table 1 – Costs Output (Q) Fixed Cost (FC) Variable Cost (VC) Total Cost (TC) Average Fixed Cost (AFC) Average Variable Cost (AVC) Average Total Cost (ATC) Marginal Cost...
The table below shows the average cost of a firm depending on the level of production....
The table below shows the average cost of a firm depending on the level of production. Q 0 1 2 3 4 5 6 AC -- 32 24 20 24 25 26 Assuming that the company is operating in the long run what are fixed costs?
The following table shows the costs that a firm faces in a perfect competitive market: Output...
The following table shows the costs that a firm faces in a perfect competitive market: Output Fixed Cost Variable Cost Total Cost Average Total Cost Marginal Cost 0 0 1 40 2 100 3 170 4 250 5 360 6 580 7 920 a.    Taking into account that the firm has a fixed cost of $200, complete the table. (20 points) b.    If the market price is $340, what is the level of output that the firm should produce in order to...
The following table shows ceremonial ranking and type of pottery sherd for a random sample of...
The following table shows ceremonial ranking and type of pottery sherd for a random sample of 434 sherds at an archaeological location. Ceremonial Ranking Cooking Jar Sherds Decorated Jar Sherds (Noncooking) Row Total A 86 49 135 B 97 48 145 C 82 72 154 Column Total 265 169 434 Use a chi-square test to determine if ceremonial ranking and pottery type are independent at the 0.05 level of significance. (a) What is the level of significance? State the null...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT