Section+Exercise+8+solns - DepartmentofEconomics 2011

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Department of Economics               Spring  2011 University of California, Berkeley         Economics 1    Head GSI: Swetha  Doraiswamy Section Exercise 8 1.  Use the following data from the Darling Flower Shop to answer the questions about its  production and profit. Quantity Total  Revenue Marginal  Revenue Total Cost Marginal Cost  Profit 0 0 -- 20 -- -20 1 30 30 40 20 -10 2 60 30 56 16 4 3 90 30 76 20 14 4 120 30 105  100 29 20 5 150 30 130 30 20 6 180 30 170 40 10 Darling Flower Shop Revenue and Cost a. How much is the company’s fixed cost? Fixed costs are costs that do not change with a firm’s output. In the short run,  firms cannot avoid fixed costs or change them even if production is zero. In this  case, at a quantity of zero, the Darling Flower Shop’s cost is 20. Thus, its fixed  cost is 20. b. Calculate total profits at every output level. See table above. c. Define marginal revenue and marginal cost.
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This note was uploaded on 04/26/2011 for the course ECON 1 taught by Professor Martholney during the Fall '08 term at University of California, Berkeley.

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Section+Exercise+8+solns - DepartmentofEconomics 2011

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