Question
Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the shortrun, assume the marginal cost of building
Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the shortrun, assume the marginal cost of building new homes equals the market price of a new home when Bob builds 10 new homes. At this level ofoutput, Bob's average fixed cost of building a new home is $160,000 and his average variable cost is $240,000 per home(so his average total cost is $400,000 perhome). If new homes are selling for $150,000, should he continue to produce 10 new homes in the short run or shutdown?
1.) In the shortrun, Bob should
A.) shut down OR
B.) produce
2.) And lose $ ___?___ . (Enter your response as a wholenumber.)
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