Quantity of VC DVDs (Q) FC TC AVC ATC MC 0 0 5,000 8,000 9,000 14,000 20,000 50,
ID: 1114704 • Letter: Q
Question
Quantity of VC DVDs (Q) FC TC AVC ATC MC 0 0 5,000 8,000 9,000 14,000 20,000 50,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 55.00 29.00 19.67 16.00 14.00 5.50 | 13.83 14.14 15.25 59,000 | 3.00 3.50 4.00 50,000 64,000 5.00 50,000 70,000 83,000 99,000 122,000 149,000 200,000 6.00 72,000 99,000 150,000 50,000 50,000 50,000 7.00 9.00 11.00 15.00 16.00 23.00 27.00 16.56 50,000 (a) What is Bob's shutdown price? (b) What is Bob's breakeven price? (c) If the market price of a DVD is $1, how many DVDs will Bob produce? (d) If the market price of a DVD is s6, how many DVDs will Bob produce? (e) If the market price of a DVD is $16, how many DVDs will Bob produce?Explanation / Answer
Answer
a)
Shutdown price is the price which minimize loss by not producing anything and which is equal to minimum AVC=$3
b)
Breakeven price is price point where average total cost equal to price which is in perfect competition is minimum average total cost and that is equal to $13.83
c)
The bob has perfectly competitive firm which produces at MC=P
at MC=P the firm may produce 3000 units or shutdown and produce 0 units
d)
MC=P=$6
the Bob will produce 5000 units
e)
at P=$16=MC
bob will produce 7000 units