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
Problem: i) What do you meant by the term ‘economic efficiency'? ii) By using appropriate examples differentiate between fixed and variable costs. iii) Consider different

Balance of payment: It is an account that summarizes a country’s total payments and total receipts from international economic transactions within a specific period usually on

VIVIDLY EXPLAIN WHAT THE RAWLSIAN SOCIAL WELFARE ENTAILS

a. Using the data in the tables below, graph on the grid the demand and supply curves for milk, assuming that all factors other than the price of milk are held constant.  Connect a

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

If coolest icecream parlor has been closing at 5pm with $120 of marginal revenue and $80 of marginal cost for the last hour open, what should coolest icecream do to maximize profit

what is the theory of second best? prove the theorem with the help of a diagram.


How is microeconomics differed from macroeconomics? Microeconomics focuses onto how decisions are made through individuals and firms and the effects of those decisions. For exa

Managerial Economies: These are many managerial economies associated with large-scale production. A large firm is in the position to employ more highly qualified and speciali