Table 3
Dozens of eggs |
Fixed Cost |
Total Cost |
Variable Costs |
Average Variable Costs per dozen |
Average Total Costs per dozen |
0 |
$3.35 |
$3.35 |
n/a |
n/a |
n/a |
10 |
$3.35 |
$10.50 |
$7.15 |
$0.72 |
$1.05 |
20 |
$3.35 |
$16.40 |
$13.05 |
$0.65 |
$0.82 |
30 |
$3.35 |
$23.10 |
$19.75 |
$0.66 |
$0.77 |
40 |
$3.35 |
$30.00 |
$26.65 |
$0.67 |
$0.75 |
50 |
$3.35 |
$36.50 |
$33.15 |
$0.66 |
$0.73 |
60 |
$3.35 |
$48.00 |
$44.65 |
$0.74 |
$0.80 |
70 |
$3.35 |
$64.40 |
$61.05 |
$0.87 |
$0.92 |
80 |
$3.35 |
$80.00 |
$76.65 |
$0.96 |
$1.00 |
90 |
$3.35 |
$135.00 |
$131.65 |
$1.46 |
$1.50 |
The break-even point is where the farm earns zero profit and price is equal to minimum of Ac. PQ= $0.72+$3.35, Q= 1 Dozen, P one dozen = $4.07
Not correct. Break-even will be where the minimum cost-output point of the ATC, MC, and Demand meet.
The shut-down point is minimum of AVC, so the price=0.72 is shut down point and Q=10. Shut down cost is where we can at least recover the variable cost (price).
Not correct. The shut-down price is found at the minimum cost-output point of the AVC where MC penetrates.
The TC of one dozen is $4.07. So economic profit is possible only when price is higher than $4.07. Here price is $1.45. So, no he will not make a profit here at this price.
Not correct. You need to come up with the correct economic profit price
a) The break-even price is the price where the MC curve intersects the AC curve or where the AC is at its minimum
= 0.73
b) The shut down price is the price where the MC curve intersects the AVC curve or where the AVC is at its minimum
= 0.65
c)
Q | TC | MC |
0 | 3.35 | |
10 | 10.5 | 0.72 |
20 | 16.4 | 0.59 |
30 | 23.1 | 0.67 |
40 | 30 | 0.69 |
50 | 36.5 | 0.65 |
60 | 48 | 1.15 |
70 | 64.4 | 1.64 |
80 | 80 | 1.56 |
90 | 135 | 5.5 |
Price = 1.45
Set P=MC to find the output where Q = 70 and where ATC = 0.92
So, the firm is earning a positive profit as Price is greater than the ATC per unit
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