The firm Narwhals R Us produces food for narwhals. The business is operating in a competitive...
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The firm Narwhals R Us produces food for narwhals. The business is operating in a competitive industry and experiences the following: • marginal revenue = $7 marginal cost = marginal revenue at $7 marginal cost = average variable cost at $4 • marginal cost = average total cost at $6 (a) Draw an accurately labeled graph of this firm's production with MC, MR, AVC, and ATC all represented. Label the profit-maximizing quantity Qpm- (b) Explain how to determine the profit-maximizing level of production. (c) If the average total cost (ATC) is $5 at the point that MC = AVC, what is the average fixed cost (AFC) at that point? (d) Is the firm earning economic profit or incurring a loss? Explain. (e) On your graph from part (a), shade the area of the firm's profit or loss. The firm Narwhals R Us produces food for narwhals. The business is operating in a competitive industry and experiences the following: • marginal revenue = $7 marginal cost = marginal revenue at $7 marginal cost = average variable cost at $4 • marginal cost = average total cost at $6 (a) Draw an accurately labeled graph of this firm's production with MC, MR, AVC, and ATC all represented. Label the profit-maximizing quantity Qpm- (b) Explain how to determine the profit-maximizing level of production. (c) If the average total cost (ATC) is $5 at the point that MC = AVC, what is the average fixed cost (AFC) at that point? (d) Is the firm earning economic profit or incurring a loss? Explain. (e) On your graph from part (a), shade the area of the firm's profit or loss.
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Related Book For
Intermediate Financial Management
ISBN: 978-1111530266
11th edition
Authors: Eugene F. Brigham, Phillip R. Daves
Posted Date:
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