Answer to Question #109349 in Microeconomics for Hiba Roukaibi

Question #109349
Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1 per poster. She has fixed costs of $500. Her variable costs are $2,000 for the first thousand posters, $1,600 for the second thousand, and then $1,000 for each additional thousand posters.



Instructions: Round your answers to 3 decimal places.



a. What is her AFC per poster (not per thousand!) if she prints 1,000 posters? $
.



What if she prints 2,000 posters? $
.



What if she prints 10,000 posters? $
.



b. What is her ATC per poster if she prints 1,000? $
.



What if she prints 2,000? $
.



What if she prints 10,000? $
.



c. If the market price fell to 95 cents per poster, would there be any output level at which Karen would not shut down production immediately? .
1
Expert's answer
2020-04-15T09:45:04-0400

"AFC =" "Total fixed cost\\over quantity"

"=" "500\\over1000"

"=0.5"


2000 poster

"=500\\over 2000"

"=0.25"


10000 posters

"=" "500\\over10000"

"=0.05"


b)Average total cost

i)1000

"=" "2000+500\\over1000"

"=2.5"


ii)2000

"=" "1600+500\\over2000"

"1.05"


iii)10000

"=" "500+1600+8000\\over10000"

"=1.01"


c)The output should be at a level where the total revenue can be able to cover for variable cost for Karen to avoid a short run.


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