{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

E202PracticeExam2.8

# E202PracticeExam2.8 - Answer The marginal cost of each of...

This preview shows page 1. Sign up to view the full content.

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 7 air conditioner is \$140. So the company should produce 6 th air conditioners per day. Total revenue is price of 120 times quantity of 6 equals 720. Total cost is 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 producer below 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 in the short run: produce quantity zero. Daily profits are a loss equal to fixed cost. Fixed cost is the difference 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 7 4. Suppose the flight between Houston and College Station can hold 36 passengers but the airline
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}