Answer to Question #62073 in Microeconomics for Benjamin Logan

Question

The Great Wall of China attracts millions of tourists every year, with many vendors selling goods at key tourist destination points. During summer, the vendors all sell icy cold bottled water. Assume the market for bottled water is perfectly competitive. Ji is a vendor in this market who sells 77 bottles (her profit-maximising quantity) at the market price of $2, with the average total cost being $2.10 per bottle. The minimum average variable cost is $1.70 per bottle.
Answer the following questions:

a.Ji’s economic profit or loss is __ (use a negative value if a loss). Answer in dollars, rounded to two decimal places (ie: to the nearest cent).

b.Should Ji shut down? Type Y for Yes or N for No.

c.State whether the following statement is true or false: "Ji needs to minimise her loss of $0.10 per bottle by producing the quantity where price equals her marginal cost." Type t for true, or f for false .

Answer 1

a. Ji’s economic profit or loss is 77*(2-2.10)=-7.7$
b.Should Ji shut down? N. because P>minAVC
c. f