Question 4 Pizza Inn Company Ltd is a new company in Accra that produces pizza, Lasagna, and Spaghetti Bolognese. The table below shows the production costs for the company. Use the table to answer the questions below Table 1: Cost for Producing Pizza Quantity Total Fixed Total Cost (TFC) Variable Cost (TVC) 1 2 3 4 5 6 60 60 60 60 60 60 Total Average Average Average Marginal Cost Fixed Cost Variable Cost Cost (TC) (AFC) (AC) (MC) 90 100 105 115 135 180 Cost (AVC) a) Fill in the cost table for Pizza Inn Company Ltd b) If the Pizza Inn operates under Perfect Competition and the market price is 20 (i.e. P=Gh20) what is the profit maximizing output level from the table c) Is this firm in the short run or long run and why? d) At the profit maximizing output level (found in A), is the firm making profit or loss; and what is the value of this profit or loss e) From your answer for D, should the firm shut down or continue to operate and why? (5 marks) f) Why is it that the Average Variable Cost tends to get closer to the Average Cost as the level of output (Quantity) increases?

Question 4 Pizza Inn Company Ltd is a new company in Accra that produces pizza, Lasagna, and Spaghetti Bolognese. The table below shows the production costs for the company. Use the table to answer the questions below Table 1: Cost for Producing Pizza Quantity Total Fixed Total Cost (TFC) Variable Cost (TVC) 1 2 3 4 5 6 60 60 60 60 60 60 Total Average Average Average Marginal Cost Fixed Cost Variable Cost Cost (TC) (AFC) (AC) (MC) 90 100 105 115 135 180 Cost (AVC) a) Fill in the cost table for Pizza Inn Company Ltd b) If the Pizza Inn operates under Perfect Competition and the market price is 20 (i.e. P=Gh20) what is the profit maximizing output level from the table c) Is this firm in the short run or long run and why? d) At the profit maximizing output level (found in A), is the firm making profit or loss; and what is the value of this profit or loss e) From your answer for D, should the firm shut down or continue to operate and why? (5 marks) f) Why is it that the Average Variable Cost tends to get closer to the Average Cost as the level of output (Quantity) increases?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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Similar questions

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Quantity (Q) 1 2 3 456700 8 Total Fixed Cost (TFC) 50.00 50.00 50.00 50.00 50.00 50.00 50.00 50.00 Total Variable Cost (TVC) 0.00 17.00 30.00 41.00 48.00 57.00 77.00 81.00 Total Cost (TC) Average Average Average Fixed Variable Total Cost Cost Cost (AFC) (AVC) (ATC) Marginal Cost (MC)
Complete the table below: Output TotalCost(RM) Totalvariablecost(RM) Totalfixedcost(RM)Averagefixedcost(RM)Averagetotalcost(RM)Marginalcost (RM) 0 505 16010 20020 25036 33058 40072 48088 580106 700130 820150 980
F a) Draw the demand process cycle and label it fully. b) A door company has the following materials in inventory. Inspect the table below and answer the following questions Material Average (in Kilograms) Price Aluminum 3884 $3.0 Steel 5850 $1.4 Iron 200 $1 Work in Progress Average Price Fence 78 230 Final Products Average Price Door 300 300 Window 550 240 i. Calculate the number of turns. ii. Calculate the cost per day.
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