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unit_8_assignment_microeconomics_10_13_17.docx
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Unit 8 Assignment Microeconomics: Break-even Price and Shut- down Price
General Instructions for all Assignments:
Insert your answers below, or in the appropriate space provided
for in the question. Your answers should follow APA format with
citations to your sources and, at the bottom of your last page, a
list of references. Your answers should also be in Standard
English with correct spelling, punctuation, grammar, and style
(double spaced, in Times New Roman, 12–point, and black font).
Respond to questions in a thorough manner, providing specific
examples of concepts, topics, definitions, and other elements
asked for in the questions.
In this Assignment, you will be assessed on the following outcomes:
Examine how changes in the cost of production affect pricing
and production quantity decisions of a firm in a perfectly
competitive market.
Apply critical thinking to the field of study.
Assignment:
In this Assignment, you will define and calculate the remaining
six major cost elements of a business, when given the Total
Costs and the Quantity Produced, as well as to use the
computed costs to determine a minimum cost output level for
that business. In addition, you will compute both the break-even
price and the shut-down price for a hypothetical business in a
perfectly competitive market, and determine if that business
would incur an economic profit at various market prices, and
should the firm continue to produce at each of those price levels.
Questions:
Table 2.a. shows an LED light bulb manufacturer’s total cost of
producing LED light bulbs.
Table 2.a.
1. What is this manufacturer’s fixed
cost? Explain why.
2. Assuming that you only know the Total Costs (TC) (as is
shown in the Table 2.a. above) explain how you would calculate
each of the following:
a. Variable Cost (VC);
b. Average Variable Cost (AVC);
c. Average Total Cost (ATC);
d. Average Fixed Cost (AFC); and,
e. Marginal Costs (of a single case).
3. In Table 3.a., for each level of output, insert into the table the
values for:
a. The Variable Cost (VC);
b. The Average Variable Cost (AVC);
c. The Average Total Cost (ATC); and,
d. The Average Fixed Cost (AFC)
Table 3.a.
e. Given the information you computed in Table 3.a., what is the
minimum cost output Level? Explain why.
4. Brenda Smith operates her own farm, raising chickens and
producing eggs. She sells her eggs at the local farmers’ market,
where there are several other egg producers’ also selling eggs
by the dozen. (Brenda operates in a perfectly competitive market
in which she is a “price taker.”) In order to make sure she does
not lose money on selling eggs, she does an analysis of her
costs for producing eggs as shown on Table 4.a
Table 4.a.
a. What is Brenda’s break-even price for a dozen of eggs?
Explain how you found that answer.
b. What is Brenda’s shut-down price for a dozen of eggs?
Explain how you found that answer.
c. If the market price of a dozen eggs at the local farmers’ market
is $1.45 per dozen, will Brenda make an economic profit?
Explain how you determined your answer.
d. If the market price of a dozen eggs at the local farmers’
market is $1.45 per dozen, should Brenda continue producing
eggs in the short run? Explain how you determined your answer.
e. If the market price of a dozen eggs at the local farmers’
market is 72 cents per dozen, will Brenda make an economic
profit? Explain how you determined your answer.
f. If the market price of a dozen eggs at the local farmers’ market
is 72 cents per dozen, should Brenda continue producing eggs in
the short run? Explain how you determined your answer.
g. If the market price of a dozen eggs at the local farmers’
market is 64 cents per dozen, will Brenda make an economic
profit? Explain how you determined your answer.
h. If the market price of a dozen eggs at the local farmers’
market is 64 cents per dozen, should Brenda continue producing
eggs in the short run? Explain how you determined your answer.
References:_____________________________
Unit 8 Assignment Microeconomics: Break-even Price and Shut- down Price
General Instructions for all Assignments:
Insert your answers below, or in the appropriate space provided
for in the question. Your answers should follow APA format with
citations to your sources and, at the bottom of your last page, a
list of references. Your answers should also be in Standard
English with correct spelling, punctuation, grammar, and style
(double spaced, in Times New Roman, 12–point, and black font).
Respond to questions in a thorough manner, providing specific
examples of concepts, topics, definitions, and other elements
asked for in the questions.
In this Assignment, you will be assessed on the following outcomes:
Examine how changes in the cost of production affect pricing
and production quantity decisions of a firm in a perfectly
competitive market.
Apply critical thinking to the field of study.
Assignment:
In this Assignment, you will define and calculate the remaining
six major cost elements of a business, when given the Total
Costs and the Quantity Produced, as well as to use the
computed costs to determine a minimum cost output level for
that business. In addition, you will compute both the break-even
price and the shut-down price for a hypothetical business in a
perfectly competitive market, and determine if that business
would incur an economic profit at various market prices, and
should the firm continue to produce at each of those price levels.
Questions:
Table 2.a. shows an LED light bulb manufacturer’s total cost of
producing LED light bulbs.
Table 2.a.
1. What is this manufacturer’s fixed
cost? Explain why.
2. Assuming that you only know the Total Costs (TC) (as is
shown in the Table 2.a. above) explain how you would calculate
each of the following:
a. Variable Cost (VC);
b. Average Variable Cost (AVC);
c. Average Total Cost (ATC);
d. Average Fixed Cost (AFC); and,
e. Marginal Costs (of a single case).
3. In Table 3.a., for each level of output, insert into the table the
values for:
a. The Variable Cost (VC);
b. The Average Variable Cost (AVC);
c. The Average Total Cost (ATC); and,
d. The Average Fixed Cost (AFC)
Table 3.a.
e. Given the information you computed in Table 3.a., what is the
minimum cost output Level? Explain why.
4. Brenda Smith operates her own farm, raising chickens and
producing eggs. She sells her eggs at the local farmers’ market,
where there are several other egg producers’ also selling eggs
by the dozen. (Brenda operates in a perfectly competitive market
in which she is a “price taker.”) In order to make sure she does
not lose money on selling eggs, she does an analysis of her
costs for producing eggs as shown on Table 4.a
Table 4.a.
a. What is Brenda’s break-even price for a dozen of eggs?
Explain how you found that answer.
b. What is Brenda’s shut-down price for a dozen of eggs?
Explain how you found that answer.
c. If the market price of a dozen eggs at the local farmers’ market
is $1.45 per dozen, will Brenda make an economic profit?
Explain how you determined your answer.
d. If the market price of a dozen eggs at the local farmers’
market is $1.45 per dozen, should Brenda continue producing
eggs in the short run? Explain how you determined your answer.
e. If the market price of a dozen eggs at the local farmers’
market is 72 cents per dozen, will Brenda make an economic
profit? Explain how you determined your answer.
f. If the market price of a dozen eggs at the local farmers’ market
is 72 cents per dozen, should Brenda continue producing eggs in
the short run? Explain how you determined your answer.
g. If the market price of a dozen eggs at the local farmers’
market is 64 cents per dozen, will Brenda make an economic
profit? Explain how you determined your answer.
h. If the market price of a dozen eggs at the local farmers’
market is 64 cents per dozen, should Brenda continue producing
eggs in the short run? Explain how you determined your answer.
References:_____________________________
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