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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
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
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