Question

Sayo runs a small, popular sushi restaurant in a large metropolitan area. The market for sushi in her town is very competitive and Sayo is essentially a price taker. She has estimated her total cost function to be c(y) = yox – 3y2 + 75y + 250. There are, of course, a number of related functions that can be derived from her total cost function. Here is a list: Average Cost (AC(y)): 19–32 +75y+250 = y2 – 3y + 75 + 250 Slope of Average Cost: 2y - 3 Average Variable Cost (AVC(y)): 39–3y +75y = y2 – 3y + 75. Slope of Average Variable Cost: 2y – 3. Marginal Cost (MC(y)): 3 y2 – 6y + 75. Slope of Marginal Cost: 6y - 6 Based on these functions, at what price will Sayo decide to shut down the restaurant in the short run? Give your answer to two decimals. $

Answer 1

# RARES AVC= y2-34 +75 for firm in Since sheet down point short run is given by Pe Min (Ave) AVC= 4234 +75 dave 24-320 dy = 29-320 y = 1.5 d² Ave a 2 >o So Minimum at y = 1.5 occur dyz So Min (AVC) (1.5² - 13x1,5)+75 = 72.75 So shut down Price $72.75 Ics Scanned with CamScanner