# ch 9 hw - Quantity of DVDs Fixed cost Variable cost 0 1,000...

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Quantity of DVDs Fixed cost Variable cost Average variable cost Total cost Average total cost Marginal cost 0 50,000 0 - 50,000 - 1,000 50,000 5,000 5 55,000 55 5 2,000 50,000 8,000 4 58,000 29 3 3,000 50,000 9,000 3 59,000 19.67 1 4,000 50,000 14,000 3.5 64,000 16 5 5,000 50,000 20,000 4 70,000 14 6 6,000 50,000 33,000 5.5 83,000 13.83 13 7,000 50,000 49,000 7 99,000 14.14 16 8,000 50,000 72,000 9 122,000 15.25 23 9,000 50,000 99,000 11 149,000 16.56 27 10,000 50,000 150,000 15 200,000 20 51 4. a. calculate Bob’s average variable cost, average total cost, and marginal cost for each quantity of output b. there is a free entry into industry, and anyone who enters will face the same cost as Bob. Suppose that currently the price of a DVD is \$25. What will Bob’s profit be? Is this a long run equilibrium? If not, what will the price of DVD movies be in the long run? Quantity of DVDs Price Total revenue Total cost Economic profit 0 25 0 50,000 -50,000 1,000 25 25,000 55,000 -30,000 2,000 25 50,000 58,000 -8,000 3,000 25 75,000 59,000 16,000 4,000 25 100,000 64,000 36,000 5,000 25 125,000 70,000 55,000 6,000 25 150,000 83,000 67,000 7,000 25 175,000 99,000 76,000 8,000 25 200,000 122,000 78,000 9,000 25 225,000 149,000 76,000 10,000 25 250,000 200,000 50,000 Bob gets the maximum profit, when he produces 8,000 quantity of DVDs; he would get \$78,000. Yes, this is long run equilibrium.

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