Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. Table 9-5 shows the firm's cost schedule.
Table 9-5
Quantity (cases) Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 $0 $76
1 30 106
2 50
3 134
4 140
5 160
6 114
7 150
8 190
9 316
Use the table to answer the following questions.
a. Complete Table 9-5 by filling in the blank cells.
b. Werner is selling in a perfectly competitive market at a price of $40. What is the profit maximizing or loss-minimizing output?
c. Calculate the firm's profit or loss.
d. Should the firm continue to produce in the short run? Explain.
e. If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase, decrease or remain unchanged compared to your answer in b.
f. Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output?
g. Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer.
h. Suppose the fixed cost remains at $76. What price corresponds to the shut-down point?
i. Suppose the fixed cost remains at $76. What price corresponds to the break-even point?
Quick Reply
