Answer to Question #332506 in Economics of Enterprise for hamza

Question

Ball Bearings, Inc., faces costs of production as follows:

Quantity Total Fixed Cost Total Variable Cost

0 $100 $0

1 100 50

2 100 70

3 100 90

4 100 140

5 100 200

6 100 360 Calculate the company’s average fixed cost, average

variable cost, average total cost, and marginal

cost at each level of production.

b. The price of a case of ball bearings is $50. Seeing

that he can’t make a profit, the chief executive

officer (CEO) decides to shut down operations.

What is the firm’s profit/loss? Was this a wise

decision? Explain.

c. Vaguely remembering his introductory economics

course, the chief financial officer tells the CEO

it is better to produce 1 case of ball bearings,

because marginal revenue equals marginal cost

at that quantity. What is the firm’s profit/loss

at that level of production? Was this the best

decision? Explain.

Answer 1

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