Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

pls answer question c B3) In his caf, Ben pays 50,000 per year for rent, and rent is Ben's only fixed cost. If the caf

image text in transcribed

pls answer question c

B3) In his caf, Ben pays 50,000 per year for rent, and rent is Ben's only fixed cost. If the caf sells Q cups of coffee in a year, the other costs add up to be 10000/Q+Q/20000 per cup. a) What is the average fixed cost? What is the average total cost? [2 marks] b) What is the variable cost? Use the expression of variable cost to derive the marginal cost. [3 marks) c) What is the annual production level such that the average variable cost is minimized? What is the difference between the marginal cost and average variable cost at this production level? [3 marks] d) Suppose Ben's caf is small and cannot influence market price. If price is P=4, use the formula for marginal cost from part b) to find the caf's (short-run) profit maximizing quantity of coffee in a year. 12 marks] e) Suppose Ben's caf is small and cannot influence market price. If price is P=4. show that at the profit maximising quantity, price is greater than ATC so Ben will want to operate. [4 marks]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Financial Management

Authors: Eugene F. Brigham, Joel F. Houston

15th edition

1337671002, 978-1337395250

Students also viewed these Accounting questions

Question

P MC d AU ATC AVC C b

Answered: 1 week ago