Assignment covers Chapter 7 Material
1. Complete the following cost and revenue schedule. Round to two decimal places.
| Average | Average | Average | |||||
| Rate of | Total | Marginal | Fixed | Variable | Total | Marginal | |
| Output | Cost | Cost | Cost | Cost | Cost | Price | Revenue |
| 0 | $ 100.00 | $ 40.00 | |||||
| 1 | $ 105.00 | $ 40.00 | |||||
| 2 | $ 115.00 | $ 40.00 | |||||
| 3 | $ 132.00 | $ 40.00 | |||||
| 4 | $ 160.00 | $ 40.00 | |||||
| 5 | $ 200.00 | $ 40.00 |
Using the completed schedule
above, answer the following questions.
a. What rate of output maximizes profit?
b. What is the profit at that rate of output?
2.
A firm has leased plant and equipment to produce video-game cartridges,
which can be sold in unlimited quantities at $13 each.
The following figures describe the associated costs of production:
| Rate of Output (per day) | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
| Total Cost (per day) | $30 | $35 | $42 | $55 | $76 | $105 | $142 | $183 | $228 |
a.
How much are
fixed costs?
b.
Graph the
total revenue and total cost curves.
c.
Draw the
average total cost (ATC), marginal cost (MC), and demand curves of the firm.
d.
What is the
profit-maximizing rate of output? Should
the producer shut-down?
(What is the size of the loss if production shuts down?
If production continues?)