Using an example of a decision that you might face in a normal day, describe carefully how you would use marginal cost and marginal benefit to help you decide. Don't forget to describe the marginal cost and the marginal benefit of your decision. When a firm chooses its profit maximizing output level, it also thinks at the margin. a) What is the name we give the firm's marginal benefit in this case? b)What is the profit maximizing rule for the firm?
Using an example of a decision that you might face in a normal day, describe carefully how you would use marginal cost and marginal benefit to help you decide. Don't forget to describe the marginal cost and the marginal benefit of your decision. When a firm chooses its profit maximizing output level, it also thinks at the margin. a) What is the name we give the firm's marginal benefit in this case? b)What is the profit maximizing rule for the firm?
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For this assignment you will do a significant portion of work in MS Excel and import it into an MS Word document for submission. You will use the data below to address Price and Output decisions faced by firms that are not in pure competition. Some numbers may be rounded.
|
Table 1 |
Ā | Ā | Ā | Ā | Ā | Ā | Ā |
|
Output |
Average Fixed cost |
Average Variable Cost |
Average Total Cost |
Marginal Cost |
Price |
Total Revenue |
Marginal Revenue |
|
0 |
Ā | Ā | Ā | Ā |
$ 345.00 |
Ā | Ā |
|
1 |
$ 180.00 |
$ 135.00 |
$ 315.00 |
Ā |
$ 300.00 |
Ā | Ā |
|
2 |
$ 90.00 |
$ 127.50 |
$ 217.50 |
Ā |
$ 249.00 |
Ā | Ā |
|
3 |
$ 60.00 |
$ 120.00 |
$ 180.00 |
Ā |
$ 213.00 |
Ā | Ā |
|
4 |
$ 45.00 |
$ 112.50 |
$ 157.50 |
Ā |
$ 189.00 |
Ā | Ā |
|
5 |
$ 36.00 |
$ 111.00 |
$ 147.00 |
Ā |
$ 165.00 |
Ā | Ā |
|
6 |
$ 30.00 |
$ 112.50 |
$ 142.50 |
Ā |
$ 144.00 |
Ā | Ā |
|
7 |
$ 25.71 |
$ 115.70 |
$ 141.41 |
Ā |
$ 126.00 |
Ā | Ā |
|
8 |
$ 22.50 |
$ 121.90 |
$ 144.40 |
Ā |
$ 111.00 |
Ā | Ā |
|
9 |
$ 20.00 |
$ 130.00 |
$ 150.00 |
Ā |
$ 99.00 |
Ā | Ā |
|
10 |
$ 18.00 |
$ 139.50 |
$ 157.50 |
Ā |
$ 87.00 |
Ā | Ā |
Address the following:
Complete Table-1. Summarize your calculations.
Prepare a graph showing:
Average Fixed Costs
Average Variable Costs
Average Total Costs
Marginal Revenue
Marginal Costs
Using the data in the table and on your graph, explain the profit maximizing, or loss minimizing level of output.
Define a normal profit and an economic profit. Are normal profits being earned in this example? Are economic profits present for this firm in this example? Explain your answers.
Given the data in the table and the graph, what type of market structure could this be in the short run? Explain your answers.
If the data in Table-1 represents the long run, what type of firm must this data represent? Explain your answers.
