you have a very small calf-raising business where you raise day-old calves until 3 months of age. You have several production possibilities as seen in the chart below. You could raise from 1-10 calves. You must determine the most profitable level of production. Complete the chart, given the following assumptions:

1. Your fixed costs are $60 total each time (not for each calf).
2. The Marginal Revenue per calf is $50. (That's the selling price for each calf.)(At the end of 3 months - yes it's low but you're just raising them, not buying them to raise...)
3. FC = Fixed Costs, VC = Variable Costs, TC = Total Costs, AFC = Average Fixed Costs, ATC = Average Total Costs, MC = Marginal Costs, Revenue = MR x # of calves, Profit = Revenue - Total Costs
4. After you complete the chart, answer the questions about your calculations. The formatting must be neat and organized. Please write out the5 questionsor answer them in complete sentences.

Questions: (To be completed after you complete the chart.)

1. What is the most profitable number of calves to produce?
2. Why is it unprofitable to produce at the highest level? (Which specific cost is causing the problem?)
3. What happens to the variable costs per calf as output increases?? Answer this and then explain how this relates to modern agriculture today?
4. What does "Marginal Cost" tell the producer?
5. What might be a fixed cost for this example? What could be a likely variable cost for this problem?

Transcribed Image Text:

1. Output (No. of calves) FC VC TC AFC ATC MC Revenue Profit 0 0 1 50 2 65 3 75 4 83 5 90 6 115 7 131 8 153 9 211 10 262 1. Output (No. of calves) FC VC TC AFC ATC MC Revenue Profit 0 0 1 50 2 65 3 75 4 83 5 90 6 115 7 131 8 153 9 211 10 262