Market demand and supply curves for clay fire pots

Question

Assignment:

Redstone Clayworks, Inc. is located in Sedona, Arizona and manufactures clay fire pits for patios. They are one of about two dozen firms around the world that manufacture and sell clay fire pits for retailers such as Home Depot, Lowe's, Front Gate, and other upscale home product chains. There is virtually no product differentiation. A clay fire pit is a clay fire pit.

The spreadsheet below gives some of Redstone's production cost data. A template for the spreadsheet is provided in the Course Materials. You may download my template or create your own. Add columns to show, respectively, average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), and short-run marginal cost (SMC).Then, add columns to show, respectively, total revenue (TR), marginal revenue (MR), total profit, average profit, and profit margin.

Assume that the world market demand and supply curves for clay fire pots intersects at $190 per unit.

If Redstone wanted to minimize average total cost, how many units would it produce?

If Redstone wishes to maximize profit MARGIN, how many units should it produce?

What level of output should the manager of Redstone choose to produce? Explain your choice in 50-100 words.

Make a copy of your spreadsheet and triple the fixed costs to 21,000. How does this change your answer to question 3? Explain your result in 50-100 words.

Suppose that fire pits fall out of fashion and prices fall worldwide to $95. How many units should the manager choose to produce? Explain your answer in 50-100 words.

Q	TC	TFC	TVC	AFC	AVC	ATC	SMC	TR	MR	Total Profit	Average Profit	Profit Margin
0	7,000	7,000	-
100	14,000	7,000	7,000
200	23,000	7,000	16,000
300	32,000	7,000	25,000
400	43,000	7,000	36,000
500	52,000	7,000	45,000
600	74,000	7,000	67,000
700	97,000	7,000	90,000
800	111,000	7,000	104,000
900	132,000	7,000	125,000
1000	152,000	7,000	145,000