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7 - 1 Kai's Katering provides catered meals and the catered...

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1. Kai's Katering provides catered meals, and the catered meals industry is perfectly competitive. Kai's machinery costs \$100 per day and is the only fixed input. His variable cost is comprised of the wages paid to the cooks and the food ingredients. The variable cost associated with each level of output is given as follows: Quantity of meals, variable cost (VC) 0, \$0 10, \$200 20, \$300 30, \$480 40, \$700 50, \$1000 a. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. b. What is the break-even price? What is the shut-down price? c. Suppose that the price at which Kai can sell catered meals is \$21 per meal. In the short run, will Kai earn a profit? In the short run, should he produce or shut down? Why? d. Suppose that the price at which Kai can sell catered meals is \$17 per meal. In the short run, will Kai earn a profit? In the short run, should he produce or shut down? Why? e. Suppose that the price at which Kai can sell catered meals is \$13 per meal. In the short run, will Kai earn a profit? In the short run, should he produce or shut down? Why?

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