Problem
The accompanying table presents the expected cost and revenue data for the Tucker Tomato Farm. The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a price-taker market.
a. Fill in the firm's marginal cost, average variable cost, average total cost, and profit schedules.
b. If the Tuckers are profit maximizers, how many tomatoes should they produce when the market price is $500 per ton? Indicate their profits.
c. Indicate the firm's output level and maximum profit if the market price of tomatoes increases to $550 per ton.
d. How many units would the Tucker Tomato Farm produce if the price of tomatoes fell to $450 per ton? What would be the firm's profits?
Should the firm stay in business? Explain.
COST AND REVENUE SCHEDULES FOR TUCKER TOMATO FARM, INC.
|
OUTPUT
|
|
|
|
AVERAGE
|
AVERAGE
|
|
|
(TONS PER
|
TOTAL
|
PRICE
|
MARGINAL
|
VARIABLE
|
TOTAL
|
PROFITS
|
|
MONTH)
|
COST
|
PER TON
|
COST
|
COST
|
COST
|
(MONTHLY)
|
|
0
|
$1,000
|
$500
|
|
|
|
|
|
1
|
1,200
|
500
|
|
|
|
|
|
2
|
1,350
|
500
|
|
|
|
|
|
3
|
1,550
|
500
|
|
|
|
|
|
4
|
1,900
|
500
|
|
|
|
|
|
5
|
2,300
|
500
|
|
|
|
|
|
6
|
2,750
|
500
|
|
|
|
|
|
7
|
3,250
|
500
|
|
|
|
|
|
8
|
3,800
|
500
|
|
|
|
|
|
9
|
4,400
|
500
|
|
|
|
|
|
10
|
5,150
|
500
|
|
|
|
|
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.