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In: Economics

Utilizing the following Christmas Tree production function that you had completed in Homework 2 that includes...

Utilizing the following Christmas Tree production function that you had completed in Homework 2 that includes output and cost information for a firm, respond to the questions given, assuming the firm is a perfectly competitive firm:

Input   (Units of Water)

Output (Christmas Trees)

MPP

TFC

TVC

TC

AFC

AVC

ATC

MC

0

0

4500

0

4500

10

70

7

4500

3500

8000

64.29

50.00

114.29

50.00

20

145

7.5

4500

7000

11500

31.03

48.28

79.31

46.67

30

220

7.5

4500

10500

15000

20.45

47.73

68.18

46.67

40

290

7

4500

14000

18500

15.52

48.28

63.79

50.00

50

345

5.5

4500

17500

22000

13.04

50.72

63.77

63.64

60

395

5

4500

21000

25500

11.39

53.16

64.56

70.00

70

440

4.5

4500

24500

29000

10.23

55.68

65.91

77.78

80

480

4

4500

28000

32500

9.38

58.33

67.71

87.50

90

515

3.5

4500

31500

36000

8.74

61.17

69.90

100.00

100

545

3

4500

35000

39500

8.26

64.22

72.48

116.67

Assume that the selling price for Christmas Trees is $80/tree.What would be the approximate profit maximizing rate of output that you would want to produce?Would the firm be generating profit above all costs at that selling price? Why or Why not?

If the price of Christmas Trees drops to $60/tree, approximately how many trees would now be produced for the optimum level?Are you making profit above all costs at $60/tree? Why or Why not?

At what price would be the short-run breakeven point?At what price would be the firm’s short-run shut down point?

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
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