The graph shown below is that of Do Drop In, a shop in the dry-cleaning industry. Cost and revenues (in dollars) 20 18 MC 16 14 12 10 8 64 2 0 60 120 D (360, 18) AC MR 180 240 300 360 420 Quantity per period a) At the optimal output, what price will Do Drop In charge and what will be its output? Price: $ Output: units b) At the optimal price and output, what will be its total revenue, total cost, and total loss? TR: $ Total loss: $ ; TC: $ c) If this firm made a rational decision to continue to produce, despite the loss, average variable cost must be below what level? AVC must be less than $
The graph shown below is that of Do Drop In, a shop in the dry-cleaning industry. Cost and revenues (in dollars) 20 18 MC 16 14 12 10 8 64 2 0 60 120 D (360, 18) AC MR 180 240 300 360 420 Quantity per period a) At the optimal output, what price will Do Drop In charge and what will be its output? Price: $ Output: units b) At the optimal price and output, what will be its total revenue, total cost, and total loss? TR: $ Total loss: $ ; TC: $ c) If this firm made a rational decision to continue to produce, despite the loss, average variable cost must be below what level? AVC must be less than $
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The graph shown below is that of Do Drop In, a shop in the dry-cleaning industry.
Cost and revenues (in dollars)
20
18
MC
16
14
12
10
8
64 2
0
60
120
D
(360, 18)
AC
MR
180 240 300 360 420
Quantity per period
Transcribed Image Text:a) At the optimal output, what price will Do Drop In charge and what will be its output?
Price: $
Output:
units
b) At the optimal price and output, what will be its total revenue, total cost, and total loss?
TR: $
Total loss: $
; TC: $
c) If this firm made a rational decision to continue to produce, despite the loss, average variable cost must be below what level?
AVC must be less than $
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