Answer: The marginal cost of each of the first 6 air conditioners produced each day is less than$120, but the marginal cost of the 7air conditioner is $140. So the company should produce 6thair conditioners per day. Total revenue is price of 120 times quantity of 6 equals 720. Total costis 510. Daily economic profit is total revenue minus total cost 720 - 510 = 210.3. What is the profit-maximizing level of output and how much daily profit will the producerbelow earn if the price of pizza is $0.50/slice?Answer: Because price is less than the minimum value of AVC, this producer will shut down inthe short run: produce quantity zero. Daily profits are a loss equal to fixed cost. Fixed cost is thedifference between total cost and total variable cost. 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 producer’s profit is thus -$130/day.Chapter 74. Suppose the flight between Houston and College Station can hold 36 passengers but the airline
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