PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY, Microeconomics

Joe Brown’s dairy operates in a perfectly competitive marketplace. Joe’s machinery costs $500 per day and is the only fixed input. His variable costs are comprised of the wages paid to the few workers he employs at the dairy and the grain he feeds to his dairy cows.

The variable cost associated with each level of output is given in the accompanying table.

Gallons of Milk Variable Cost
0 -
1000 $ 2,100
2000 $ 2,200
3000 $ 2,900
4000 $ 3,680
5000 $ 5,180

a. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output.

Gallons of Milk FC VC TC MC AVC ATC
0 $500 - - - -
1000 500 $ 2,100 2600 2.10 26.00
2000 500 $ 2,200 2700 2.70 1.35 27.00
3000 500 $ 2,900 3400 1.70 1.13 11.30
4000 500 $ 3,680 4180 1.39 .92 10.45
5000 500 $ 5,180 5680 1.42 1.13 11.36

b. What is the break-even price?



c. What is the shut-down price?


d. Suppose that the price at which Joe can sell milk is $3 per gallon. In the short run, will Joe earn a profit?



e. In the short run, should he produce or shut down?



f. Now suppose that the price at which Joe can milk is $1.50 per gallon. In the short run, will Joe earn a profit?



g. In the short run, should he produce or shut down?




h. Finally, Suppose that the price at which Joe can sell milk is $0.50 per gallon. In the short run, will Joe earn a profit?



i. In the short run, should he produce or shut down?







Posted Date: 8/19/2012 3:25:45 PM | Location : United States







Related Discussions:- PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY, Assignment Help, Ask Question on PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY, Get Answer, Expert's Help, PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY Discussions

Write discussion on PERFECT COMPETITION and THE SUPPLY CURVE & MONOPOLY
Your posts are moderated
Related Questions
1. Assume that the market for wheat is perfectly competitive. Suppose the demand curve for wheat is given by: QD = 200 – 2P where QD is the quantity demanded, in bushels, and P i


What is the purpose of the IMF and why might the IMF be called the “lender of last resort”? Discuss how three of the tools they use for establishing economic stability in a country

#queA monopolist has a constant marginal and average cost of $10 and faces a demand curve Of Qd = 1000-10P. Marginal revenue is given by MR= 1000-1/5Q. stion..


Let''s assume that a monopolist decides to maximize revenue, rather than profit. How does this operating objective change the size of the deadweight loss?


different types of production funtion and curve given by different economist

if the inverse demand curve is p=120-Qand the marginal cost is constant at 10, how does charging the monopoly a specific tax of 10 per unit affect the monopoly optimum and the welf