2. You are thinking to start your food catering business by making rolled tacos, which are often called taquitos (corn tortillas) and flautas (flour tortillas). As suggested, one important step is to estimate startup costs and prepare the budget. Your estimate shows, on a daily basis, your fixed cost (FC), including rent, utility, fees and tax, is about $300 per day. Your variable cost (VC) is largely depending on the units of labor (variable input) you are going to use. Hiring one labor will cost you $120 per day. Use the information given, to finish the questions below.

(1) The table below presents the cost structure of your taco business. The first two columns give you the number of your output or tacos (Y) and the units of labor inputs. To finish this table, you need to calculate variable cost (VC), total cost (TC), marginal cost (MC), average variable cost (AVC) and average total cost (ATC). Note: MC = TC / Y.

Output, Variable input and Costs (per day)

Tacos	Labor	VC	TC	MC	AVC	ATC
50	1	120	420	0.00
105	2
165	3
230	4
288	5
340	6
385	7
420	8
450	9
460	10

(2) What is the shape of the daily marginal cost (MC) curve, the average variable cost (AVC) curve and the average total cost (ATC) curve? And why they look like that shape? After some study to your long-run average total cost, you find it has a similar shape as the short-run (daily) ATC curve. Why the long-run ATC curve has such a shape?

3. Following the question above, after studies to your cost and budget, you now need to consider market structure of tacos catering in the city you operate your business. Use the cost information obtained from the previous question, to finish the questions here.

(1) Suppose you are now operating your business in a town which has a very competitive taco catering market. There are many restaurants and food caterers providing rolled tacos (flautas and taquitos). Your business is just one of many of them. If the market price (P) is $4.00 per rolled taco, to maximize your profit, how many tacos you should make per day? At this output level, what are the values of your marginal cost (MC), marginal revenue (MR), average revenue (AR), total revenue (TR) and total profit? Note: Total profit = Total revenue - Total cost. Your results are estimated as values per day.

(2) Due to several factors, the tacos market has dramatically changed in this town. Now you are the only rolled tacos maker. You have a demand curve for your taco as Q = 305 - 20 * P, where Q is the quantity demanded for your tacos per day and P is the market price ($) of each your taco. The output decision maximizing your profit is now to make 165 tacos per day. Then, what is the market price of each rolled taco? What is the relationship between, MC, MR, P and AR? And how much is your total profit at this level of output?