Quantity of Output Total Cost 0 $12 1 $14 2 $18 3 $24 4 $32 5 $42 6 $54 7 $68 The table above shows the total cost function for a typical firm producing hats in a perfectly competitive market. The market price for hats is $9 per hat. (a) Calculate the average variable cost of the fifth unit. Show your work. (b) What is the firm’s profit-maximizing quantity of hats? Explain using marginal analysis. (c) Draw a correctly labeled graph showing the firm’s demand and marginal cost curves, and show the profit-maximizing quantity of hats determined in part (b).
Quantity of Output Total Cost 0 $12 1 $14 2 $18 3 $24 4 $32 5 $42 6 $54 7 $68 The table above shows the total cost function for a typical firm producing hats in a perfectly competitive market. The market price for hats is $9 per hat. (a) Calculate the average variable cost of the fifth unit. Show your work. (b) What is the firm’s profit-maximizing quantity of hats? Explain using marginal analysis. (c) Draw a correctly labeled graph showing the firm’s demand and marginal cost curves, and show the profit-maximizing quantity of hats determined in part (b).
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section: Chapter Questions
Problem 3CQQ
Related questions
Question
Quantity of Output | Total Cost |
---|---|
0 | $12 |
1 | $14 |
2 | $18 |
3 | $24 |
4 | $32 |
5 | $42 |
6 | $54 |
7 | $68 |
The table above shows the total cost function for a typical firm producing hats in a
(a) Calculate the average variable cost of the fifth unit. Show your work.
(b) What is the firm’s profit-maximizing quantity of hats? Explain using marginal analysis.
(c) Draw a correctly labeled graph showing the firm’s
(d) If the rent of the building the firm occupies increases, what will happen to the firm’s profit-maximizing quantity of output in the short run? Explain.
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