EC101P39cans - EC 2001 Problem Set No. 3 Answers (1) See...

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EC 2001 Problem Set No. 3 – Answers (1) See Table below. (a) P = $113 ≥ MC = $110, so Q* = 8 (b) Q TR TC profit 7 $791 $51 0 $281 8 904 620 284 9 1,01 7 750 267 (c) P = $63 ≥ MC = $50, so Q* = 5. Since P = $63 > AVC = $54, they should produce 5 units in the short run. Since P = $63 < ATC = $70, they should not produce in the long run. (d) P = $51 < AVC at all output levels shown in the table, so Q* = 0 both in the short run and in the long run. Q TFC TVC TC AFC AVC ATC MC 0 80 0 80 --- --- --- --- 1 80 110 190 80.00 110.0 0 190.0 110 2 80 150 230 40.00 75.00 115.0 40 3 80 180 260 26.70 60.00 86.7 30 4 80 220 300 20.00 55.00 75.0 40 5 80 270 350 16.00 54.00 70.0 50 6 80 340 420 13.30 56.67 70.0 70 7 80 430 510 11.40 61.43 72.9 90 8 80 540 620 10.00 67.50 77.5 110 9 80 670 750 8.89 74.44 83.3 130 1 0 80 830 910 8.00 83.00 91.0 160 1 1 80 1020 110 0 7.27 92.73 100.0 190
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1 2 80 1240 132 0 6.67 103.0 0 110.0 220 (2) Assume the plane used by Globe Air has 100 seats. ( Any number will do.) Then the incremental revenue (IR) is given by:
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EC101P39cans - EC 2001 Problem Set No. 3 Answers (1) See...

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