You Should Do This Problem in Three Steps Table 2

question 292

Essay

You should do this problem in three steps.First: Fill in Table 1.Assume fixed cost is $1000 and price is $575.
Table 1:
$\begin{array}{cc}&Variable &Total &Average &Average &Marginal \\Output&Cost &Cost& Variable ~Cost& Total Cost&Cost\\1 & \$ 500 \\2 & 800 \\3 & 1000 \\4 & 1300 \\5 & 1800 \\6 & 2700\end{array}$
Table 2:
$$\begin{array} { l } &&&&&&How~much\\If~ the &&&What ~would ~the~ firm ~do~ in~ the&&& Will ~Output~ Be \\price~ were:&& Long~ Run?&& Short Run?&& In~ the~ Short ~Run?\\\$ 900 \\500 \\300\end{array}$$
Second:Draw a graph of the firm's demand,marginal revenue,average variable cost,average total cost,and marginal cost curves on a piece of graph paper.Be sure to label the graph correctly.On the graph,indicate the break-even and shutdown points and the firm's short-run and long-run supply curves.Third:Calculate total profit in the space below,then answer questions a through d.
(a)The minimum price the firm will accept in the short run is $_______.(b)The minimum price the firm will accept in the long run is $_______.(c)The output at which the firm will maximize profits is ______.(d)The output at which the firm will operate most efficiently is _______.

Understand the law of diminishing returns and its impact on marginal cost.

Identify the conditions for a purely competitive firm to earn a normal profit in the short run.

Interpret cost data to determine production levels for profit maximization.

Explain the concept of a firm's supply curve in the context of price and output decisions.

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Definitions:

Line Extension

A strategy where a company expands its existing product line into new variations or flavors to meet different customer needs or to capture a wider market.

Recoup Investment

The process of regaining the money that has been spent on an investment, usually via profits generated from the investment.

Brand Relevant

The degree to which a brand is perceived as important and meaningful to its target audience's needs and preferences.

Brand Equity

The value that a brand adds to a product or service based on consumers' perceptions, recognition, and loyalty.