Question

plz all the question and how and why was it solve this way thanks a lot

21. Refer to the graph below that represents a firm in the short run in a perfectly competitive market. If the price is $8 per unit, the firm Single Representative Firm MC 10 15 20 25 30 35 40 45 50 Quantity (Number of Units) A. will shut down. B. will continue to produce output and make a profit. C. will continue to produce output and make a loss. D. none of the above Refer to the following table for questions 22 - 21. The accompanying table shows a pizzeria's variable cost and total costs at different levels of output. Some cells have been left blank for you to determine. Number of Pizzas Per Day Variable cost Total Cost ($/Day) 300 450 150 250 25 50 75 100 125 850 1,650 750 1,150 1,950

Answer 1

Answer

21)

The correct answer is (c) will continue to produce output and make a loss.

In order to maximize profit a firm produces that quantity at which P = MC

where P = price and MC = Marginal Cost.

In short run a firm incurs fixed cost which he will incur even if he shut downs. Thus Fixed cost plays no role in deciding whether he should produce or shut down in the short run.

Thus In the short run he will produce If he recovers at least his total variable cost(TVC).

From the above graph At that quantity i.e. quantity where P = MC, AVC < MC = P = 8

TVC = AVC*Q and TR = P*Q = 8Q

As AVC < * for this Q(discussed above)=> 8Q > AVC*Q => TR > TVC where TR = Total Revenue, AVC = Average variable cost and Q = quantity.

Thus his revenue is more than his total variable cost cost and thus he is recovering his variable cost and hence he will produce and not shut down.

Also At this profit maximizing quantity P = MC < ATC

Profit = TR - TC = P*Q - ATC*Q and as P < ATC thus Profit < 0 and hence he is incurring loss.(Total cost(TC = ATC*Q)

Hence the correct answer is (c) will continue to produce output and make a loss.

22)

The correct answer is (C) $300.

Total Cost(TC) = Total Variable cost(TVC) + Total Fixed Cost(TFC)

We can see from above that when Quantity = 0, TVC = 0, TC = 300.

Hence 300 = 0 + TFC => TFC = 300

Hence Total fixed cost = 300.

Hence the correct answer is (C) $300.

23)

The correct answer is (B) $550.

TC = TFC + TVC

As discussed above that TFC = 300 and as fixed cost is constant and thus TFC = 300 whatever be the amount of pizzas Produced.

When Number of pizzas produced(Q) = 50, TVC = 250

Hence, TC = TFC + TVC = 300 + 250 = 550.

Hence, the correct answer is (B) $550.

24)

The correct answer is (B) $450.

TC = TFC + TVC

As discussed above that TFC = 300 and as fixed cost is constant and thus TFC = 300 whatever be the amount of pizzas Produced.

When Number of pizzas produced(Q) = 75, TC = 750

Hence, TC = TFC + TVC => 750 = 300 + TVC.

=> TVC = 450

the correct answer is (B) $450.

25)

The correct answer is (C) $11.5

Average Total Cost = TC/Q

When Number of pizzas produced(Q) = 100, TC = 1150

=> ATC = 1150/100 = 11.5

Hence, the correct answer is (C) $11.5