Asked by Kristin Kowing on Jul 30, 2024
Verified
Refer to Scenario 14-4. Compare the firm's profit or loss at 200 units of output with its profit or loss if it were to shut down.
Average Variable Cost
The total variable costs divided by the quantity of output, representing the variable cost per unit of output.
Marginal Cost
The escalation in total financial outlay due to the creation of one more unit of a product or service.
Average Total Cost
Calculated by dividing the total cost to produce a product by the quantity of the product produced, it represents the per-unit cost of production.
- Familiarize oneself with the concept and implications of average and marginal costs in the framework of corporate processes.
- Explore the process through which competitive entities determine their production and sales strategies in the short run.
- Calculate the economic results as profit or loss by employing the concepts of total revenue, average revenue, and marginal revenue.
Verified Answer
JG
jeremiah ganawayAug 05, 2024
Final Answer :
At Q = 200, Profit = ($20 - $23) X 200 + $ -600. The firm's fixed cost is FC = (ATC - AVC) X Q = ($23 - $16) X 200 = $1,400, so at Q = 0, Profit $-1,400.
Learning Objectives
- Familiarize oneself with the concept and implications of average and marginal costs in the framework of corporate processes.
- Explore the process through which competitive entities determine their production and sales strategies in the short run.
- Calculate the economic results as profit or loss by employing the concepts of total revenue, average revenue, and marginal revenue.