This table represents some of John's costs of production. John operates in a perfectly competitive market and
Question:
This table represents some of John's costs of production. John operates in a perfectly competitive market and takes price as given. At a quantity of three units, for example, a variable cost of $54 gives the total variable cost required to make the three units. Total cost of $174 is the sum of variable costs and the $120 fixed cost. Average variable cost ($18) and average total cost ($58) are equal to variable cost and total cost divided by the quantity of three. Marginal cost of $16 is the cost of increasing production from two units to three units, so it represents the cost of producing the third unit. In the short run, John cannot avoid fixed costs such as her lease payments on his building. In the long run, he can avoid the fixed costs.
1. What is the lowest price at which John would be willing to produce a positive-level output in the short run (if your answer is $10.32, then answer in the following format: 10.32)?
2. What is the lowest price at which John would be willing not to exit the industry in the long run (if your answer is $10.32, then answer in the following format: 10.32)?
3.If the current short-run price is $37 per unit of output, how much output will John produce?
Expert Answer:
Answer Ans 1 1680 Ans 2 3289 Ans 3 9 Explanation Ans 1 1680 The rule to whether to produce or shut d... View the full answer
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
