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

Total Total Fixed Variable Quantity Costs Costs 0 $100 $ 0 1 100 50 2 100 70 3 100 90 4 100 140 5 100 200 6 100 360

a. Calculate the company’s average fixed costs, average variable costs, average total costs, and marginal costs.

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

Seeing that she can’t make a profit, the Chief Executive Officer (CEO) decides to shut down operations. What are the firm’s profits/

losses? 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 are the firm’s profits/losses at that level of production? Was this the best decision?

Explain.