To maximize profits Frances will produce the level of output where marginal revenue is equal to marginal cost. Since marginal cost of $1.60 is the closet to the marginal revenue of $1.80, so Frances will sell 6 hotdogs per day at $1.80 each. Her profit equal (1.80x6) – 6.80 = $4.

b) If the equilibrium price of hot dogs falls to $1.00, Frances will produce 2 hot dogs and charge $1.00 per hot dog. So her loss equal (1.00 x 2) – 3.50 = -1.50

c) If the equilibrium price of hot dogs falls to $0.25, Frances will produce 4 hot dogs and charge $0.25 each. So she will suffer a loss of (0.25x4) – 4.50 = -3.50.

Transcribed Image Text:

Q 68695 WNTO0 1 2 3 4 7 4: a) FC $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 VC $- $1.50 $2.50 $3.20 $3.50 $4.20 $5.80 $7.70 $9.70 $12.00 TC $1.00 $2.50 $3.50 $4.20 $4.50 $5.20 $6.80 $8.70 $10.70 $13.00 ATC $- $2.50 $1.75 $1.40 $1.13 $1.04 $1.13 $1.24 $1.34 $1.44 AVC $- $1.50 $1.25 $1.07 $0.88 $0.84 $0.97 $1.10 $1.21 $1.33 MC $- $1.50 $1.00 $0.70 $0.30 $0.70 $1.60 $1.90 $2.00 $2.30 Q 68695 WNTO0 1 2 3 4 7 4: a) FC $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 VC $- $1.50 $2.50 $3.20 $3.50 $4.20 $5.80 $7.70 $9.70 $12.00 TC $1.00 $2.50 $3.50 $4.20 $4.50 $5.20 $6.80 $8.70 $10.70 $13.00 ATC $- $2.50 $1.75 $1.40 $1.13 $1.04 $1.13 $1.24 $1.34 $1.44 AVC $- $1.50 $1.25 $1.07 $0.88 $0.84 $0.97 $1.10 $1.21 $1.33 MC $- $1.50 $1.00 $0.70 $0.30 $0.70 $1.60 $1.90 $2.00 $2.30

Answer rating: 100% (QA)

ANSWER a Frances will produce 6 hotdogs per day at 180 each Her profit will ... View the full answer