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Author Question: Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. (Read 3520 times)

j.rubin

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on: Oct 8, 2019

Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. Table 12-5 shows the firm's cost schedule.

Table 12-5

Quantity (cases) Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 $0 $76
1 30 106
2 50
3 134
4 140
5 160
6 114
7 150
8 190
9 316

Use the table to answer the following questions.

a.

 Complete Table 12-5 by filling in the blank cells.

b.

 Werner is selling in a perfectly competitive market at a price of $40. What is the profit maximizing or loss-minimizing output?

 

c.

 Calculate the firm's profit or loss.

d.

 Should the firm continue to produce in the short run? Explain.

e.

 If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase, decrease, or remain unchanged compared to your answer in b.

 

f.

 Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output? 

 

g.

 Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer.

 

h.

 Suppose the fixed cost remains at $76. What price corresponds to the shut-down point?

i.

 Suppose the fixed cost remains at $76. What price corresponds to the break-even point?

« Last Edit: Sep 28, 2020 by Celeste »
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Marked as best answer by j.rubin on Oct 8, 2019

joshbk44

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Reply #1 on: Oct 8, 2019
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