The company XYZ produces chairs and its costs are given in the table below. Variable Quantity Total Costs $3,600 Variable Costs $2,400 Fixed Costs $1,200 Value 30 In the short run, should this company shut down if the price of the chair is $95/unit? a. Yes, because the average total cost is higher than the price. O b. Yes, because the average variable cost is higher than the price. O c. No, because the average total cost is higher than the price. d. No, because the average variable cost is lower than the price.

The company XYZ produces chairs and its costs are given in the table below. Variable Quantity Total Costs $3,600 Variable Costs $2,400 Fixed Costs $1,200 Value 30 In the short run, should this company shut down if the price of the chair is $95/unit? a. Yes, because the average total cost is higher than the price. O b. Yes, because the average variable cost is higher than the price. O c. No, because the average total cost is higher than the price. d. No, because the average variable cost is lower than the price.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In perfect competition, if the marginal cost increases which way does the curve shift? what are some things that would increase the marginal cost curve and if the MC curve shifts then does the ATC curve?
Brody's firm produces trumpets in a perfectly competitive market. The table below shows Brody's total variable cost. He has a fixed cost of $240, and the price per trumpet is $60.-Calculate the average total cost of producing 6 trumpets. Show your work. -Calculate the marginal cost of producing the 11th trumpet. -What is Brody's profit-maximizing quantity? Use marginal analysis to explain your answer. -At the profit-maximizing quantity you determined in part (c), calculate Brody's profit or loss. Show your work. -Brody also produces saxophones at a loss in a perfectly competitive market. Draw a correctly labeled graph for Brody's firm showing the following at a market price of $200. -Brody's profit-maximizing quantity of saxophones -Brody's loss, completely shaded Quantity Total Variable cost 6 $120 7 $145 8 $165 9 $220 10 $290 11 $390
The owner of Tie-Dyed T-shirts, a perfectly competitive firm, hires you to give him economic advice. He tells you that the market price for his shirts is $15 and that he is currently producing 200 shirts at an AVC of $10 and an ATC of $20. What would you recommend that he do? O a. Tell him that you cannot make any recommendations until you know what his fixed costs are. O b. Continue producing in the short run, as his loss from production is less than his fixed costs, but exit the industry in the long run if there are no changes in economic conditions. Oc Shut down in the short run, as he is incurring a loss, and leave the industry in the long run, if there are no changes in economic conditions. O d. Continue to produce in the short run, even though he is earning a loss, and expand production in the future hoping to increase market share and total revenue.
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