This preview shows page 1. Sign up to view the full content.
Unformatted text preview: TC = Q x ATC = (260 slices/day) ($1.18/slice) = $306.80/day and VC = Q x AVC = (260 slices/day) ($0.68/slice) = $176.80/day. So fixed cost = $306.80/day  $176.80/day = $130/day. This producers profit is thus $130/day. Chapter 7 4. Suppose the demand for gasoline is P = 3.5  (1/48) Q and the supply of gasoline is P = 1 + (1/48) Q. a. Graph the market for gasoline. What is the equilibrium price and quantity? Answer : Find equilibrium quantity by setting 3.5  (1/48) Q = 1 + (1/48) Q, so (1/24) Q = 2.5 and Q = 60 gallons. Find equilibrium price by substituting Q = 60 into demand P = 3.5  (1/48) Q = 3.5  60/48 = 3.5  1.25 = 2.25 so P = $2.25....
View
Full
Document
 Spring '08
 BRIGHTWELL

Click to edit the document details