In order to receive credit for this assignment you must use the marginal revenue-marginal cost analysis and you must explain how you arrived at your answers and show your work / calculations. You will receive only partial credit if you use the total revenue-total cost analysis to determine you answers.
|
TOTAL
OUTPUT
|
AVERAGE
FIXED COST
|
AVERAGE
VARIABLE COST
|
AVERAGE
TOTAL COST
|
MARGINAL
COST
|
|
0
|
--
|
--
|
--
|
--
|
|
1
|
$ 50.00
|
$ 40.00
|
$ 90.00
|
$ 40.00
|
|
2
|
25.00
|
36.00
|
61.00
|
32.00
|
|
3
|
16.67
|
30.00
|
46.67
|
18.00
|
|
4
|
12.50
|
30.00
|
42.50
|
30.00
|
|
5
|
10.00
|
32.00
|
42.00
|
40.00
|
|
6
|
8.33
|
35.00
|
43.33
|
50.00
|
|
7
|
7.14
|
40.00
|
47.14
|
70.00
|
|
8
|
6.25
|
47.50
|
53.75
|
100.00
|
A. The market price for this firm's product is $38.00. Will it be advantageous for this firm to produce in the short-run? Why or why not? If it will produce, what amount of output will the firm produce? What will its total economic profit or loss be (whether the firm produces or closes down)?
B. Market demand has decreased and the market price for this firm's product now decreases to $29.00. Now will it be advantageous for this firm to produce in the short-run? Why or why not? If it will produce, what amount of output will the firm produce? What will its total economic profit or loss be (whether the firm produces or closes down)?
C. Market demand has now increased and the market price for this firm's product increases to $71.00. Now will it be advantageous for this firm to produce in the short-run? Why or why not? If it will produce, what amount of output will the firm produce? What will its total economic profit or loss be (whether the firm produces or closes down)?