6. Heloise and Abelard produce letters in a perfectly competitive industry. Heloise is much better at it than Abelard: On average, she can produce letters for half the cost of Abelard’s. True or False: If Heloise and Abelard are both maximizing profit, the last letter that Heloise produces will cost half as much as the last letter written by Abelard. Explain your answer. 7. Hack’s Berries faces a short-run total cost of production given by TC= Q3–12Q2+ 100Q+ 1,000.a. What is the level of Hack’s fixed cost?b. What is Hack’s short-run average variable cost of producing berries? (Express AVCas a function of Qc. If the price of berries is $60, how many berries should Hack produce? How do you know? [Hint: You may want to carefully graph the AVCfunction you derived in part (b).]d. If the price of berries is $73, should Hack be producing berries? Explain. .) Goolsbee1e_Solutions_Manual_Ch08.indd 97 Goolsbee1e_Solutions_Manual_Ch08.indd 97 11/15/12 3:09 PM 11/15/12 3:09 PM
98 Part 3 Markets and Prices Solution Solution Solution
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