Problem Set #6 answer - Econ 101 1.(a) x 0 1 2 3 4 5 6 7 8...

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Econ 101 ANSWERS TO PROBLEM SET 6 Professor Wissink Cornell University 1.(a) x fc vc tc afc avc atc mc 0 50 (0) (50) 4 - 4 - 1 50 10 60 50 (10) 60 10 2 50 18 (68) 25 9 (34) 8 3 50 (28) 78 16.67 9.33 26 10 4 50 42 (92) 12.5 10.5 23 (14) 5 50 60 110 10 (12) 22 18 6 50 84 134 8.33 14 22.33 (24) 7 50 119 (169) 7.14 17 24.14 35 8 50 (168) 218 6.25 (21) 27.25 49 (b) (c) The short-run supply curve for the firm is the part of the srmc curve above the sravc curve. If p < minimum sravc, zero output is supplied. (d) From the supply curve, we see that 6,000 should be supplied. At this level tr = 6 × $30 = $180 and tc are $134 (from table) so profit is $46. (e) If price were about $22 per thousand, the firm would set the output at about 5,000 and tr = tc (price is at mc = atc). (f) In the short run the firm will produce 4,000 at price $16, losses are tc - tr = $92 - $16 × 4 = $28. Observe that this is still smaller than shut-down losses, $50. In the long run the firm can avoid losses by not producing anything. 2.(a) False. In addition to the cost functions, one has to know his or her demand/revenue conditions to determine the profit maximizing level of output. Profit is the
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Problem Set #6 answer - Econ 101 1.(a) x 0 1 2 3 4 5 6 7 8...

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