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Unformatted text preview: and average total cost at this level of production is $1.75. What level of profit is this firm earning? Explain. Maxine's Cookie Shop is earning profits of $50 per day. This can be calculated by taking total revenue ($2 x 200 = $400) and subtracting total cost ($1.75 x 200 = $350). 5. Consider a competitive firm that produces tomatoes. The fixed costs are $10 per bushel and the relationship between TVC (total variable cost) and output is shown in table below. Compute SAVC (short-run average variable cost) and SMC (short-run marginal cost). How much output will be supplied if P = $45 and the firm wants to maximize profits? Output = 2 if P = $45, since this is the output level at which the price equals marginal cost....
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- Fall '08