Question $1(6$ marks$)$

Using all information provided, complete the following table. It would be easier if you

set this up in an Excel spreadsheet. When you are done, please insert it into a Word

document with your answers. You will use this table to answer Questions $2$ and $3.$

We are working in dollars and cents so your answers should be in dollars and cents

as well $(2$ decimal places.

# of

workers Quantity TVC AVC AFC TC ATC MC

$00$

$110000$

$221000$

$337000$

$455000$

$574000$

$680000$

$770000$

Question $2(1$ mark$)$

What is the lowest price you would be willing to start producing this new product?

Explain why.

Question $3(1$ mark$)$

If you were already committed to the fixed costs, how low could the price per vase fall

before you would consider shutting down production? Explain why. Remember you

have to keep paying your fixed costs whether you produce any vases or not. If you

can cover your variable costs, then anything over that will reduce your fixed costs.

You may be losing money in the short run but you are losing less money.

For Questions $4$ to $7,$ you need to fill in the chart for each question. You need to

STATE how many workers, the level of production and the profit you will make.

Your costs, quantities and # of workers will be the same as you calculated in

Question $1.$

Question $4(1$ mark$)$

If the price per vase was fixed at $$35,$ what would you do$?$ Remember, in the short

run you can$$t alter fixed costs, you can just decide where to set the level of

production. You need to calculate total revenue and profit or loss for each level as

you are given the average revenue. Remember to state both what level of

production you would choose and what dollar profit you would make.

# of

workers P x Q Price Q FC $+$ VC Profit or Loss

Total

Revenue

Average

Revenu

e Total Cost Total Profit

$0$

$1$

$2$

$3$

$4$

$5$

$6$

$7$

Question $5(1$ mark$)$

If the price per vase was fixed at $$30\mathrm{.}00,$ what would you do in the SHORT RUN?

Again, remember that you have to keep paying your fixed costs in the short run. Fill in

the chart and state what level of production you would use. State what is your profit at

this level?

# of

workers P x Q Price Q FC $+$ VC Profit or Loss

Total

Revenu

e

Average

Revenue

Total

Cost Total Profit

$0$

$1$

$2$

$3$

$4$

$5$

$6$

$7$

Question $6(1$ mark$)$

If the price per vase was fixed at $$18\mathrm{.}00,$ what would you do in the SHORT RUN? Fill

in the chart and state what level of production you would use.

# of

workers P x Q Price Q FC $+$ VC Profit or Loss

Total

Revenue

Average

Revenue

Total

Cost Total Profit

$0$

$1$

$2$

$3$

$4$

$5$

$6$

$7$

Question $7(1$ mark$)$

If marketing data showed you could sell the following number of vases at the prices

indicated, how many vases would you produce and what would be your profit? Fill in

the chart.

# of

Vases

$10,00$

$0$

$210003700055000740008000070000$

Price

$($AR$)$

$$55$ $$50$ $$45$ $$40$ $$36$ $$35$ $$26$

# of

Worker

s PxQ price FC $+$ VC

Profit or

Loss

TR AR Q TC TP

$0$

$1$

$2$

$3$

$4$

$5$

$6$

$7$

Question $8(1$ mark$)$

If the producers choose the level of production in Question $7,$ explain whether this

market is in equilibrium or not.

Question $9(7$ marks$)$

a$.$ The textbook explains the difference between productive efficiency and allocative

efficiency. It also explains what price a company would set under each type of

efficiency. How are they different? Provide an example of each, not in the textbook

and state what the price for the product would be$.(3$ marks$)$

b$.$ The textbook differentiates between accounting profit and normal profit. Explain the

difference and provide $3$ examples of items that would be included in the calculation

of normal profits, but not accounting profits. What is another name for these normal

costs? What level of economic profit should a business strive for? Why? $(4$ marks