Question

Econ question. Yes, I know this is the math section. I'm desperate :/

Answer 1

@jim_thompson5910 do you know how to do this at all?

Answer 2

a)

why will the firm want to keep producing?

Answer 3

Beccause Price > Average Total cost..right?

Answer 4

I think you meant price > Average variable cost

Answer 5

oops, yeah, sorry :P

Answer 6

(btw, the prof said that since the prices aren't exact on the chart to go to the closest number, rounded down. so 56=55 on the chart)

Answer 7

that's correct, as long as

price > Average variable cost

the firm will want to produce

Answer 8

What's the marginal revenue in part a)?

Answer 9

marginal revenue = amount of money brought in for selling one additional unit

Answer 10

what column should i be looking at?

Answer 11

marginal revenue = price per unit

Answer 12

so 10?

Answer 13

$56 is the price

Answer 14

7.87 (Mc-atc?)

Answer 15

Em, kind of. So it's the exact same number?

Answer 16

are you familiar with the idea that firms should produce the number of items such that MR = MC ?

Answer 17

MR = marginal revenue = price per item sold
MC = marginal cost

Answer 18

Sorry, I thought revenue was what they gained after paying costs.

Answer 19

no, that's profit

Answer 20

profit = revenue - costs

Answer 21

revenue is the money coming in
expenses (or costs) is the money going out

Answer 22

so the first box in a = Yes
second box in a = 56?
third box (profit) = 7.87

Answer 23

ah ok ok.

Answer 24

the rule is that if MR > MC then the firm will have positive profit

since MR - MC > 0

so the firm will keep bumping up the output until MR = MC

if MR < MC then the firm will lose money per item (so it will lose money overall). So either they fix the problem to get to MR = MC or they go out of business

Answer 25

look at the chart

when is MR = MC

MR = price = 56

Answer 26

?? at 8?

Answer 27

yes, at 9 or above, MR < MC

so 8 is the highest we should go

Answer 28

the firm should produce 8 units

Answer 29

hm, ok. So it is profitable for them to produe, yeah?

Answer 30

one sec

Answer 31

Ok :)
These are the options they give me.

Answer 32

what is the average total cost to produce 8 units?

what is the total cost to produce 8 units?

Answer 33

ATC = 48.13
Tc = ? average fixed cost + average variable?

Answer 34

ATC = average total cost
TC = total cost
Q = quantity produced


ATC = TC/Q

Answer 35

Side note:

TC/Q = (FC + VC)/Q

TC/Q = FC/Q + VC/Q

TC/Q = AFC + AVC

where...

FC = fixed costs
VC = variable cost
AFC = average fixed cost
AVC = average variable cost

because TC/Q = AFC + AVC we can see that saying "average total cost = average fixed cost + average variable cost" is true

Answer 36

But how do I find the total cost?

Answer 37

ATC = average total cost
TC = total cost
Q = quantity produced


ATC = 48.13
TC = unknown for now
Q = 8


ATC = TC/Q

Answer 38

ATC = TC/Q

48.13 = x/8

x = ??

Answer 39

385.04?

Answer 40

yes

Answer 41

TC = 385.04
TR = ???

TR is the total revenue

Answer 42

TR = Q*MR = Q*Price

Q = quantity produced
MR = price

Answer 43

448?

Answer 44

yes

Answer 45

profit = TR - TC

Answer 46

62.96

Answer 47

that's the total profit

what is the profit per unit?

Answer 48

7.87

Answer 49

Dude, I gott that answer forever ago by doing MC - ATC. That works too, no?

Answer 50

when you produce 8 units,

MC - ATC = 55 - 48.13 = 6.87

Answer 51

7.87 is the correct result for "profit per unit"

Answer 52

I plugged in the original number, 56.
so it was 56-48.13 = 7.87

Answer 53

I see, yes

MR - ATC = 56-48.13 = 7.87

works. I wasn't thinking of that easier shortcut lol. So you're correct

Answer 54

haha k. So i'm confused where these numbers plug into the chart though.

Answer 55

7.87 is the profit per unit for part a

Answer 56

third box?

Answer 57

yes in the first column

Answer 58

Ok, I got column a and b correct but c wrong.

Answer 59

here's a handy table (see attached)

Answer 60

Oh wow..that is very thorough! haha
I am soo sorry this has taken so long. I'm in an irritable mood and late-night homework is not good for my health xP You're a champ.

Answer 61

excel did much of the work really

let me look at part c

Answer 62

hmm..well I put 20.50 on c last row but it said it's wrong.

Answer 63

what are the drop box options in the second part of part c?

Answer 64

not applicable
loss minimizing
profit maximizing

Answer 65

do you think it's not applicable?

Answer 66

yeah because it's definitely not profit maximizing

I don't think any items will be produced at all because MR < AVC for all values of Q

Answer 67

so basically the firm is faced with these choices

either

a) produce nothing and lose $60 (the fixed cost initially invested)

OR

b) produce items and lose more than $60. If you look at my table, you'll see -73, -81, etc in the P column. So they stand to lose more money. So they are best just shutting down and moving elsewhere or producing something else.

Answer 68

hm ok. That makes sense.
But it also says the output is not 4?

Answer 69

the output would be 0

Answer 70

since any other output makes them lose more than $60

Answer 71

oh xD so then total loss = ? 0? or 60?

Answer 72

total loss = 60

Answer 73

60 is the fixed cost (to buy a machine or something)

they lose whatever the initial fixed cost is if they don't produce anything and decide to move onto something else

Answer 74

so maybe the owners thought they would make money, but after investing the $60, they realize they'll lose more money. So it's just something they have to live with and move on

Answer 75

Wait, where is 60 on the chart they gave me?

Answer 76

Actually, if you don't want to answer that it's all good. All the answers are correct now. Thanks again. A lot.

Answer 77

the 60 is the fixed cost

I know this because when 1 item is produced, the average fixed cost (AFC) is $60

AFC = FC/Q
60 = FC/1
60*1 = FC
FC = 60

Answer 78

you can use other rows, like when Q = 10

AFC = FC/Q
6 = FC/10
6*10 = FC
FC = 60

and you get the same result

Answer 79

I see ^-^ thanks.

Answer 80

you're welcome

Answer 81

:)