1. How much is fixed cost (TFC)? For the following questions, first check: a) is P greater than or equal to, AVC at any level of output? If not, do not produce. You will lose only your fixed cost (TFC) If you CAN cover AVC for some level of output, you can produce and want to now get MC as close to MR (which in this case = price) without exceeding it. Produce that quantity. If you can't cover your total costs, you will minimize your losses. If you CAN cover your total costs (and therefore earn an economic profit), you will maximize your profit. 2. If the price is $50 per unit, how many would we produce? 3. If price is $105 per unit
1. How much is fixed cost (TFC)? For the following questions, first check: a) is P greater than or equal to, AVC at any level of output? If not, do not produce. You will lose only your fixed cost (TFC) If you CAN cover AVC for some level of output, you can produce and want to now get MC as close to MR (which in this case = price) without exceeding it. Produce that quantity. If you can't cover your total costs, you will minimize your losses. If you CAN cover your total costs (and therefore earn an economic profit), you will maximize your profit. 2. If the price is $50 per unit, how many would we produce? 3. If price is $105 per unit
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 8SQP
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