Problem set # 4 Answer

1 . (a) :

[b) : 350 000 $ ,

: ⑧ 000
, $
: 430 000 ,

(C] -

400
,
000 -
350 000
,
=
50 000 ,

( A) + ] →

400, 000 430 000 -

,
= -
30, 000 [ )
.

[e) > [ + ]
430, 000

.
1
2
VC TC AVEVCIQ ATETCIQ MEDTC
O ×
π
O X

1 ∅ 4O 40
2 55 12 5 . 275 5
45 5 150 π 20

1 OO 117 5
.

1 O0 200
6 5 lb 5 22 π .
27 5 .

MC
* MC ATC AVC
ATC .

→ MC , AVC ,ATC
π
AVC

'
3 First ,
rrite AC Table '

Q 2 β 4 5 b 7
22 5
A 26 .
67 .
183 17 14
.
→
Decreasing
B 12 14 5 b 117 →
encreausing
ε 16 16. 17 5 17 67
. 18 43
.

s inl 52 decreasing increasing tben in $ Q 57

Firm A gets ecanomies of scale beause it Manotones

cecreasing. AC .

Firm B Getsdiseconomiesofscalebecausea f Manotone increasing Ac .

Firm C has economics ef scale on 15 Q 53 auddisecanomicson

4 QST
t *notethat ithas shaped
( O graph )

4 θ ∅ Case i ) shatdawn .

P MR 27 $ per job
=
Shatdown if PKAVC
P . Q 27 10 2M0 $ sino P 27 AVC 25
TR
=
= × . =
,

TC 280 $ 27725 ,
P > AVC → Continae

FC ZO $
VC TG -FC 280 30 250 $
Case iil Exit
= - =

AVC 25 $
VIQ 250110 = =
Exit if KATC
ATC TClQ 280/10 = =
28 $ sina P= 27, ATC =
28

PKATC → Exit .

5 . (a)
Q TFC TVC TC AFETFCIQ AETCLQ ATC TCIQ=
MC OTC =

X
O 0 O 0 X × X

1 100 ∞ IOO ∞ 50
2 10 n 17O ∞ 8π
100 % 623
lOO 140 240 5 ⑤
1oo 300 40
61O0 360 400 16 61. H.7 160
 [ b) Profit =
O ,
Joss = -

100 ( Since it has fixed Cost)

Shutdown if PKAVC
since P 50 =
,
minimum ralae of AVC =
30

PEAVC in Q 1 6 =
, .

P > AVC in Q 2 3 4 5 -
, , ,

→ Shutdown is not reonable .

CCJ P MRE 5$ =

if , TR= ×= 501= 50 ,TC = P

-1⑤= 50~ 10= - 100
L,
Q 4 TR
=
,
=
50 =4 200 C=240> - 40 [ ]
Q=
3
, R =50 ×3 =10 TC 190 > -

40 "

Q1 ×

6 .
(a) = P ATC ( (0 - = -

87 × 100 =
200
( b) MR MC =
,

MR AEP 1O
=

MGIO
(0) AVC
ATC AVC+ AFC AFC FC/Q
=
,
= =
/
200 100 = 2
AVEATC APC 8 2 6 -
= ~ =

( d] M= ( 0 ATC =δ ,
,
MCTATC
Q 1 O0
=