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INFORMATION: Assume that EasyComp, a computer company operating in a perfectly competitive market structure, produces affordable, easy-to-use home computer systems. EasyComp has xed costs of
INFORMATION: Assume that EasyComp, a computer company operating in a perfectly competitive market structure, produces affordable, easy-to-use home computer systems. EasyComp has xed costs of $250. EasyComp's marginal cost of producing computers is $700 for the rst computer, $250 for the second, $300 for the third, $350 for the fourth, $400 for the fth, $450 for the sixth, and $500 for the seventh. Please respond to the following questions below by drawing on the three criteria of the empirical and quantitative skills core objective. a. Please ll in the missing cost values in the table below by drawing on the above given information and by rounding your calculations to the nearest whole number where you round numbers of 0.5 and above up and numbers of 0.49 and below down. (criteria: manipulation of numerical data or observable facts) Q TC ATC TVC AVC MC (Total Cost) (Average (Total (Average (Marginal total cost) variable cost) variable cost) cost) b. Please state rst at what price the break-even point would be and then briey describe how you found the break-even point based on values above. (criteria: analysis of numerical data or observable facts) c. Please state rst at what price the shutdown point would be and then briey describe how you found the shutdown point based on the values above. (criteria: analysis of numerical data or observable facts) d. If EasyComp sells the computers for $500, please state whether EasyComp is making a prot or a loss? Next, please describe how large the prot or loss is and show your analysis. (criteria: analysis of numerical data or observable facts) e. Sketch a graph with MR, MC, and ATC curves to illustrate your answer and show the prot or loss. (criteria: manipulation of numerical data or observable facts) f. Would you advise EasyComp to stay in business or shut down the business based on the shown prot or loss? Please justify your conclusion! (criteria: informed conclusion) g. Based on the knowledge gained om the above analysis, what must any future computer company that wants to enter this perfectly competitive market make sure it can do in order to be protable? (criteria: informed conclusion) h. If the market structure were to change from perfect competition to monopolistic competition, what would the now monopolistically competitive computer company EasyComp have to do in order to become more protable compared to its peer computer companies? (criteria: informed conclusion)
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