Question

Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal profit. a. What is ATC per unit for each level of output listed in the table? Instructions: Round your answers to 2 decimal places. MC ATC $ $ Output 50,200 100,200 150,2001 200,200 TC 155,000 205,000 242,500 335,500 0.45 0.95 1.61 2.30 b. Is this a decreasing-cost industry? (Click to select) c. Suppose that the market price for a bottle of vitamins is $1.61 and that at that price the total market quantity demanded is 255,340,000 bottles. How many firms will there be in this industry? firms
Help please.

Thank you. Be safe, healthy, and well!

Answer 1

Answer:

a) ATC= Total cost/Total output

Thus, the average total cost per unit for each level of output is listed in below table:

OUTPUT	TC (In $)	MC (In $)	ATC
50200.00	155000.00	0.45	3.09
100200.00	205000.00	0.95	2.05
150200.00	242500.00	1.61	1.61
200200.00	335500.00	2.30	1.68

b) Yes, this is a decreasing cost industry.

Explanation: As we can see from the above table as Output is increasing the ATC is decreasing. Thus, it's a decreasing cost industry till output= 150200. After that at output 200200 the ATC increases, so it's a increasing cost industry at this level of output.

c) Market price of a bottle of vitamins = $1.61
Total market quantity demanded = 255340000

Now, from the above table we can clearly see that at MC (Marginal cost) of $1.61 there was total output of 150200.

Thus, Marginal price equals marginal cost where P= MC= $1.61 and Q= 150200.

Therefore, the total number of firms which will be there in this industry:

255340000/150200= 1700.

d) Their will only be 1 firm as we can refer from the above table at $1.61, total output is 150200, as this is equal to an individual firm's ouput.