Calculate average total cost, Business Economics

Calculate Average Total Cost

A perfectly Competitive firm is operating at a profit-maximizing level of output, q*. This output level is 500 units.

At this output level, the firm earns a Total Revenue of $3,000. At this output, the firm faces the following costs:

  Total Fixed Costs of $1,200

  Total Variable Costs of  $3,300 and   

(A) Solve for the Market Price. PE

 = ___

(B)  Solve for ATC (average total cost) at an output level of 1,000 units.  

ATC= _

(C) Calculate the firm's profit. (Specify if this is positive or negative profit.)  

Profit = _____

(D) Should the firm shut down or keep producing in the Short Run? 

(E) Graph this, for the firm; indicate the demand curve the firm faces. Also indicate the MC, ATC, and AVC curves. Label q* on the quantity axis. Indicate the value of the ATC & AVC curves (and PE) at the level of output q*. (Label these values on the Price Axis. )

Draw in the Profit Box as well.  

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Posted Date: 2/14/2013 7:49:16 AM | Location : United States

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