SUMMARIZE YOUR CALCULATIONS AND USE MICROSOFT EXCEL. DRAW ONE GRAPH SHOWING AVERAGE FIXED COSTS, AVERAGE VARIABLE COSTS, AVERAGE TOTAL COSTS, MARGINAL REVENUE AND MARGINAL COSTS.

OUTPUT	AVERAGE FIXED COST	AVERAGE VARIABLE COST	AVERAGE TOTAL COST
0
1	$180.00	$135.00	$315.00
2	$90.00	$127.50	$217.50
3	$60.00	$120.00	$180.00
4	$45.00	$112.50	$157.50
5	$36.00	$111.00	$147.00
6	$30.00	$112.50	$142.50
7	$25.71	$115.70	$141.41
8	$22.50	$121.90	$144.40
9	$20.00	$130.00	$150.00
10	$18.00	$139.50	$157.50

OUTPUT	MARGINAL COST	PRICE	TOTAL REVENUE	TOTAL REVENUE
0		$345.00
1		$300.00
2		$249.00
3		$213.00
4		$189.00
5		$165.00
6		$144.00
7		$126.00
8		$111.00
9		$99.00
10		$87.00

SUMMARIZE YOUR CALCULATIONS AND USE MICROSOFT EXCEL.

DRAW ONE GRAPH SHOWING AVERAGE FIXED COSTS, AVERAGE VARIABLE COSTS, AVERAGE TOTAL COSTS, MARGINAL REVENUE AND MARGINAL COSTS.

USING THE DATA IN THE TABLE AND ON YOUR GRAPH, WHAT IS THE PROFIT MAXIMIZING, OR LOSS MINIMIZING LEVEL OF OUTPUT? EXPLAIN AND JUSTIFY ANSWER.

WHAT IS A NORMAL PROFIT AND WHAT IS AN ECONOMIC PROFIT

Expert Solution

Profit Maximizing output is where MR = MC.

MR is closest with MC at Output of 4 units. So 4 is the Profit maximizing output.

Normal Profit does not consider the cost if the entrepreneur uses his own land or the salary foregone by him, whereas economic profit considers all these cost components while calculating the profit.

OUTPUT	AVERAGE FIXED COST	AVERAGE VARIABLE COST	AVERAGE TOTAL COST	TOTAL COST (ATC * OUTPUT)
0
1	$180.00	$135.00	$315.00	315*1 = $315
2	$90.00	$127.50	$217.50	217.50*2 = $434
3	$60.00	$120.00	$180.00	180*3 = $540
4	$45.00	$112.50	$157.50	157.5*4 = $628
5	$36.00	$111.00	$147.00	147*5 = $735
6	$30.00	$112.50	$142.50	142.5*6 = $852
7	$25.71	$115.70	$141.41	141.41*7 = $989.87
8	$22.50	$121.90	$144.40	144.40*8 = $1155.2
9	$20.00	$130.00	$150.00	150*9 = $1350
10	$18.00	$139.50	$157.50	157.5*10 = $1575

OUTPUT	MARGINAL COST (TC_n - TC_n-1)	PRICE	TOTAL REVENUE (Price * Output)	MARGINAL REVENUE (TR_n - TR_n-1)
0	-	$345.00	345*0 = 0	-
1	-	$300.00	300*1 = $300	300 - 0 $300
2	434 - 315 = $119	$249.00	249*2 = $498	498-300 = $198
3	540-434 = $106	$213.00	213*3 = $639	639 - 498 = $141
4	628-540 = $88	$189.00	189*4 = $756	756-639 = $117
5	735 - 628 = $107	$165.00	165*5 = $825	825-756 = $69
6	852-735 = $117	$144.00	144*6 = $864	864-825 = $39
7	989.87 - 852 = $137.87	$126.00	126*7 = $882	882-864 = $18
8	1155.2 - 989.87 = $165.33	$111.00	111*8 = $888	888-882 = $6
9	1350 - 1155.2 = $194.8	$99.00	99*9 = $891	891-888 = $3
10	1575 - 1350 = $225	$87.00	87*10 = $870	870 - 891 = -$21

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