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ECF1100: MICROECONOMICS Answers to tutorial 11 Chapter 10, Problem 1 As shown in the following table, Volvo’s greater production volume gives it substantially lower average production cost, and this advantage helps explain why Volvo’s market share has in fact been growing relative to Saab’s. Saab Volvo Annual production 50 000 200 000 Fixed cost (\$) 1 000 000 000 1 000 000 000 Variable cost (\$) 500 000 000 2 000 000 000 Total cost (\$) 1 500 000 000 3 000 000 000 Average cost per car (\$) 30 000 15 000 Chapter 10, Problem 7 (a, b, c, d, e only) To answer this question, we need a table of George’s total and marginal revenue: Customer Quantity sold Reservation price (\$/photo) Total revenue (\$/day) Marginal revenue (\$/photo) A B C D E F G H 1 2 3 4 5 6 7 8 50 46 42 38 34 30 26 22 50 92 126 152 170 180 182 176 50 42 34 26 18 10 2 –6 a. Since marginal cost equals \$12, George will set a price consistent with serving only the first five customers (he would not serve customers F, G and H, since they

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