Jane's Juice Bar has the following cost schedules:

In the following table, complete the marginal cost, average variable cost, and average total cost columns.

On the following graph, use the orange points (square symbol) to plot the marginal-cost curve for Jane's Juice Bar. (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 vat of juice to 2 vats of juice is $5, then you would plot a point at (1.5, 5).) Then use the purple points (diamond symbol) to plot the average-variable cost curve starting at 1 vat of juice, and use the green points (triangle symbol) to plot the average-total-cost curve also starting at 1 vat of juice.

Marginal CostAverage Variable CostAverage Total Cost01234564035302520151050CostsQuantity (Vats of juice)6, 25

Which of the following statements are true according to the previous graph? Check all that apply.

The marginal-cost curve is below the average-total-cost curve when output is less than four and average total cost is declining.

The marginal-cost curve is below the average-total-cost curve when output is greater than four and average total cost is rising.

The marginal-cost curve lies above the average-variable-cost curve.

1. A company has fixed cost of $45,000, variable cost per unit of $11, and sells its product at $18 each.

a) What quantity must the firm sell in order to break-even? Explain how you reached this conclusion.

b) What is the firm's total revenue at the break-even level of output? Show your calculation.

c) What is the firm's total variable cost at the break-even level of output?

d) What quantity must the firm sell in order to make a profit of $62,000? Explain how you reached this conclusion.

8. The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a perfectly competitive firm that produces novelty ear buds in a competitive market. The market price of ear buds is $6.00 per pair.

Instructions: In part a, enter your answer as the closest given whole number.

a. If Buddies wants to maximize its profits, how many pairs of ear buds should it produce?

      pairs

Instructions: In parts b-d, round your answers to 2 decimal places.

b. At the profit-maximizing quantity, what is the total cost of producing ear buds?

     $

c. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what is Buddies weekly profit?

     $

d. If the market price is $5.50 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what is Buddies weekly profit?

     $

e. Buddies earns a normal profit when

marginal cost equals average cost at the minimum of average cost.

marginal cost equals average cost.

marginal cost equals marginal revenue at the minimum of marginal cost.

average cost equals average revenue at the minimum of average cost.

10. If a purely competitive firm shuts down in the short run,

it will realize a loss equal to its total variable costs.

it will realize a loss equal to its explicit costs.

it will realize a loss equal to its total fixed costs.

its loss will be zero.

The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Smitten, a perfectly competitive firm that produces children’s mittens in a competitive market.

Smitten's Production Costs

Instructions: In part a, enter your answer as a whole number. In parts b–d, round your answers to two decimal places.

a. If the market price of children’s mittens is $6.00 per pair, how many pairs of children’s mittens should Smitten produce per week to maximize its profits?

     pairs of mittens

b. What is Smitten’s average total cost at the profit-maximizing quantity of children’s mittens?

   $

c. What are Smitten’s weekly profits if the market price is $6.00 per pair and the firm produces the profit-maximizing quantity of mittens?

   $

d. What are Smitten’s weekly profits if the market price is $5.50 per pair and the firm produces the profit-maximizing quantity of mittens?

     $

e. The price at which Smitten would earn a normal profit is where:

• average cost equals average revenue at the minimum of average cost.

• marginal cost equals average cost.

• marginal cost equals average cost at the minimum of average cost.

• marginal cost equals marginal revenue at the minimum of marginal cost.

The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Smitten, a perfectly competitive firm that produces children’s mittens in a competitive market.

Smitten's Production Costs

Instructions: In part a, enter your answer as a whole number. In parts b–d, round your answers to two decimal places.

a. If the market price of children’s mittens is $6.00 per pair, how many pairs of children’s mittens should Smitten produce per week to maximize its profits?

________ pairs of mittens

b. What is Smitten’s average total cost at the profit-maximizing quantity of children’s mittens?

   $ ________

c. What are Smitten’s weekly profits if the market price is $6.00 per pair and the firm produces the profit-maximizing quantity of mittens?

   $ ________

d. What are Smitten’s weekly profits if the market price is $5.50 per pair and the firm produces the profit-maximizing quantity of mittens?

     $ ________

e. The price at which Smitten would earn a normal profit is where:

• marginal cost equals average cost.

• marginal cost equals marginal revenue at the minimum of marginal cost.

• marginal cost equals average cost at the minimum of average cost.

• average cost equals average revenue at the minimum of average cost.

Assume the following cost data are for a purely competitive firm:

1. At a product price of $56, will this firm produce in the short run? Why or why not? If it is preferable to produce, what will be the profit-maximizing or loss-minimizing output? Explain. What economic profit or loss will the firm realize per unit of output.
2. Answer the relevant questions of (i) assuming product price is $41
3. Answer the relevant questions of (i) assuming product price is $32
4. Which will be the price the company will have to confront in the long run, assuming freedom to entry and exit and identical costs for all players?  (Hint: remember the long-run ATC curve)

11. Average fixed cost

12. Economies of scale occur when

13. Which of the following is a characteristic of a competitive market?

14. Firms operating in competitive markets produce output levels where marginal revenue equals

15. If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

Compute the ABC rates based on the following information:

Compute the single overall predetermined overhead rate based entirely on direct labor-hours:

Compute the cost for completing 100,000 widgets if the direct materials cost was $45,000 and the Direct labor cost was $60,000.   They data for activity based costing is below: