Problem: A firm has total fixed costs of $60 and average variable costs as indicated in the table below.
Total Output Average Variable Cost
0 $0
1 45.00
2 42.50
3 40.00
4 37.50
5 37.00
6 37.50
7 38.57
8 40.63
9 43.33
10 46.50
1) Calculate AFC, ATC, MC, and TC.
2) 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 output? What economic profit will the firm realize at the profit-maximizing?
3) How are your answers of the question b) changed if the price changed to $41?