Costs of Production Consider a firm producing sugar candies. The following table shows the production costs of the firm: Sugar candy production Number of Average cost per boxes box 100 1 0.00 101 1 0.1 0 102 1 0.20 103 1 0.30 The current output level of the firm is 100 boxes of sugar candies per month. Then a new customer makes an offer to purchase a box of candies at $1 5.00. If the offer is accepted the firm "hasty; increase its production to 101 boxes for the period. Should the firm accept the offer? Explain using marginal analysis. Consider a small business that makes pastries. The business has rented a building to be used as its factory and shop floor. The rent of the building is $2,000 per week. The rest of the firrn's weekly costs are as follows: - Income lost from alternative employment - $2,000 - Explicit variable costs - $1,500 - Implicit variable costs - S 500 i, If the firm sells 1,000 pastries per week, at $6 per pastry, calculate the firm's weekly Consider a small business that makes pastries. The business has rented a building to be used as its factory and shop floor. The rent of the building is $2,000 per week. The rest of the firrn's weekly costs are as follows: . Income lost from alternative employment - $2,000 - Explicit variable costs $1,500 . Implicit variable costs - $ 500 i, lfthe firm sells 1,000 pastries per week, at $6 per pastry, calculate the firm's weekly - Accounting profit, and 7 V J L - Economic profit ii. Based on your answer to part DJ. above, should the firm continue to operate? Why or why not? iii. Assume that the firm continues at the current output level of 1,000 pastries per week while the prices start to fall. The firm should consider 'shutdown' if the price falls below what dollar value? Explain using relevant calculations and oonoeptd