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ceruleanmosquito986Lv1

28 Sep 2019

Production/Cost Exercises 1. The following is a short-run production table for a firm with labor as its only variable input. Wage = $ 310 Capital = 100 Capital Price= $20 Product Price= $65

Labor Output

0 0

1 50

2 110

3 160

4 200

5 230

6 250

7 260

8 265

9 260

10 250

A. Determine the following measures at all levels of output: MPL, APL, TFC, TVC, TC, TR, AVC, ATC, AFC, MC, PROFIT.

B. At what level of output is the profit maximized?

C. What kind of observations can you make about MC, price, average total cost, and profit?

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Joshua StredderLv10

28 Sep 2019

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Related questions

Each unit of input, X, costs $10. Fixed costs are $50, regardless of the level of output.

a.Complete the table below.

Labor, X	Total Output (TPP)	Marginal Physical Product (MPP)	TFC	TVC	TC	AFC	AVC	ATC	MC/unit
0	0
1	15
2	45
3	70
4	90
5	105
6	110
7	112

b.If the product can be sold for $0.75 per unit, what is the optimal level of output?

C. Find the level of profit at the optimal level of output. Explain what would happen if the firm produced one more unit of output in terms of marginal cost and marginal revenue.

Fill in the blanks below with the correct cost information.

Output TFC TVC TC AFC AVC ATC MC

0 ______

1 45.00 _____

2 40 ______

3 15.00 ______ 35

4 ______ 30

5 ______ 35

6 ______ 40

7 ______ 45

8 ______ 55

9 ______ 65

10 ______ 75

b. Assuming a purely competitive market, determine the optimal output and economic profit or loss for $55.

c. Answer the same questions as in part b. assuming a price of $32.

d. Answer the same questions as in part b. assuming a price of $45.

e. What output level does diminishing marginal returns begin to set in? How do you know this?

f. At what output level does Stage 2 of production begin?

greywallaby434

Redstone Clayworks Inc. is located in Sedona, Arizona, and manufactures clay fire pits for patios. They are one of about two dozen firms around the world that manufacture and sell clay fire pits for retailers such as Home Depot, Lowe's, Front Gate, and other upscale home product chains. There is virtually no product differentiation. A clay fire pit is a clay fire pit.

The spreadsheet below gives some of Redstone's production cost data.

Assume that the world market demand and supply curves for clay fire pots intersect at $190 per unit.

Q	TC	TFC	TVC	AFC	AVC	ATC	SMC	TR	MR	Profit	Average	Profit
											Profit	Margin
0	7000	7000	NIL	NIL	NIL	NIL	NIL	0	NIL	-7000	NIL	nil
100	14000	7000	7000	70	70	140	70	19000	190	5000	50	26%
200	23000	7000	16000	35	80	115	90	38000	190	15000	75	39%
300	32000	7000	25000	23.33	83.33	106.67	90	57000	190	25000	83.33	44%
400	43000	7000	36000	17.5	90	107.5	110	76000	190	33000	82.5	43%
500	52000	7000	45000	14	90	104	90	95000	190	43000	86	45%
600	74000	7000	67000	11.67	111.67	123.33	220	114000	190	40000	66.67	35%
700	97000	7000	90000	10	128.57	138.57	230	133000	190	36000	51.43	27%
800	111000	7000	104000	8.75	130	138.75	140	152000	190	41000	51.25	27%
900	132000	7000	125000	7.78	138.89	146.67	210	171000	190	39000	43.33	23%
1000	152000	7000	145000	7	145	152	200	190000	190	38000	38	20%

AFC = total fixed cost/total output.

AVC = total variable cost/total output.

ATC = total cost/total output.

MC = change in total cost/change in output.

Total revenue = price * quantity. And given that the demand and supply intersect at $190, which implies that the equilibrium price is $190 because the point where the demand equals the supply determines the price.

MR = change in total revenue/change in output.

Profit = total revenue - total cost.

Average profit = total profit/total output.

Profit margin = total profit/total revenue*100 or (revenue - cost)/revenue*100.

Question:

What level of output should the manager of Redstone choose to produce? Explain your choice in 50-100 words.