Graph the Average Cost and the Marginal Cost for three different levels of Fixed Cost: $0,...

Graph the Average Cost and the Marginal Cost for three different levels of Fixed Cost: $0, $5,000, and $10,000.
Assuming that the firm is a Price Taker in the product market (that is, it can sell as many units as it wants without affecting the market price), compute the minimum price that would make production profitable when Fixed Costs are $0, $5,000, and $10,000.

Provide both your answer and a brief explanation.

Units Produced	Total Variable Cost
1	$198
2	$392
3	$583
4	$770
5	$953
6	$1,133
7	$1,311
8	$1,485
9	$1,656
10	$1,825
11	$1,991
12	$2,155
13	$2,317
14	$2,477
15	$2,634
16	$2,790

Expert Solution

Units Produced	Total Variable Cost	Total Cost at Fixed cost = 0	AC at FC=0	Mc at FC=0	Total Cost at Fixed cost = 5000	AC at FC=5000	Mc at FC=5000	Total Cost at Fixed cost = 10000	AC at FC=10000	Mc at FC=10000
1	198	198	198.00		5198	5198.00		10198	10198.00
2	392	392	196.00	194	5392	2696.00	194.00	10392	5196.00	194.00
3	583	583	194.33	191	5583	1861.00	191.00	10583	3527.67	191.00
4	770	770	192.50	187	5770	1442.50	187.00	10770	2692.50	187.00
5	953	953	190.60	183	5953	1190.60	183.00	10953	2190.60	183.00
6	1,133	1133	188.83	180	6133	1022.17	180.00	11133	1855.50	180.00
7	1,311	1311	187.29	178	6311	901.57	178.00	11311	1615.86	178.00
8	1,485	1485	185.63	174	6485	810.63	174.00	11485	1435.63	174.00
9	1,656	1656	184.00	171	6656	739.56	171.00	11656	1295.11	171.00
10	1,825	1825	182.50	169	6825	682.50	169.00	11825	1182.50	169.00
11	1,991	1991	181.00	166	6991	635.55	166.00	11991	1090.09	166.00
12	2,155	2155	179.58	164	7155	596.25	164.00	12155	1012.92	164.00
13	2,317	2317	178.23	162	7317	562.85	162.00	12317	947.46	162.00
14	2,477	2477	176.93	160	7477	534.07	160.00	12477	891.21	160.00
15	2,634	2634	175.60	157	7634	508.93	157.00	12634	842.27	157.00
16	2,790	2790	174.38	156	7790	486.88	156.00	12790	799.38	156.00

a.

b.

For a price taker, in order to be profitable for a firm, it needs to produce at minimum average cost so that it covers all the costs and would be efficient

Units Produced	Minimum AC at FC=0	Minimum AC at FC=5000	Minimum AC at FC=10000
16	174.38	486.88	799.38

Rahul Sunny answered 1 year ago

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