Question

Dollars per sack (thousands) $380 -Deum 204 261 ATC AVC 258 0 2 4 6 8 10 12 14 16 18 20 22 24 26 Quantity of coffee (sacks of 60 kilos) a. The figure describes the cost and revenue structure of a perfectly competitive coffee farm, on a per-unit basis. What is the profit maximizing number of sacks when the price of coffe mizing number of sacks when the price of coffee in the market is $380 dollars? b. When the coffee farmer maximizes profit, how much is his profit? c. What is the total cost of production when the firm maximizes profit? d. How much is the profit lost when the farmer produces 6 sacks instead of 14 sacks? 2. A fast food restaurant currently pays $5 per hour for servers and $50 per hour to rent ovens and other kitchen machinery. The restaurant is using the amount of machinery and labor such that MP/MP1 = 12. Is the restaurant minimizing its cost of production? Show your work. 3. Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market is highly competitive, with boxes currently selling for $100 per thousand. Conigan's total and marginal cost curves are: TC - 3,000,000+ 0.00102 MC = 0.0020 where Q is measured in thousand box bundles per year. a. Calculate Conigan's profit maximizing quantity. Is the firm earning a profit? b. Analyze Conigan's position in terms of the shutdown condition. Should Conigan operate or shut down in the short run?

Answer 1