Question

19. Answer this question by filling in the blanks below: (opts) Joel's Slick Shack total cost of producing take-out meals are described below. Quantity Marginal Cost (5) Gost (9) a) The businesses fixed costs are_ (Hint: Think about costs that do not vary with output) b) The marginal cost of the Sth meal produced is- c) Suppose the meals can be sold for $10 each (Marginal Revenue and suppose the restaurant sells 5 meals. (This may or may not be the best choice of a production level, on the part of the restaurant owner). In the case of Smeak total revenue marginal revenue total profit d) If the meals can be sold for $10 each producing meals will bring the restaurant the most profit. Explain in a sentence or two below) how you arrived at your answer e) Graph the fined cost and marginal cost curves (on the same graph) if meals can be sold for only S7 each. The restaurant should produce meals and will make in profit). Explain in a sentence or two below how you arrived at your answer, and also show your calculations (below)

Answer 1

Answer:

The table with total cost (TC), marginal cost (MC), total revenue (TR), marginal revenue (MR) and total profit is given below:

Price is assumed to be $10:

Quantity	TC	MC	TR (P*Q)	MR	Profit
0	9	-	0	-	0
1	15	6	10	10	-5
2	20	5	20	10	0
3	27	7	30	10	3
4	37	10	40	10	3
5	49	12	50	10	1
6	66	17	60	10	-6

a) Business's fixed costs are $9. (Even when the quantity is 0, total costs show $9. So it is fixed cost as it has to be incurred whether there is production or not).

b) Marginal cost of 5th meal produced is $12.

c) At price $10, sale of 5 meals total revenue = $50 (10 * 5)

marginal revenue = $10 (from the table)

total profit = TR - TC = 50 - 49 = $1

d) If meals can be sod for $10 each, producing 4 meals will bring the restaurant the most profit.

This is because the optimum quantity is when MC = MR. From the table wee see that MR = MC = 10 when quantity = 4.

e) Fixed cost and marginal cost are shown in the following graph:

2 3 4 5 6

f) If meals can be sold for $7, it should produce 3 meals (and will make $3 in profit).

When quantity of meals = 3, marginal cost is $7, and marginal revenue is $10. So the profit would be 10 - 7 = $3.

OR, at quantity = 3, TC = 27, TR = 30. So profit = TR - TC = 30 - 27 = $3