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Question 3 [42 Marks] The cost and output data of a manufacturer of cable modems are described in the following table. Use the given Information
Question 3 [42 Marks] The cost and output data of a manufacturer of cable modems are described in the following table. Use the given Information to answer the questions below: Cost (TC) Marginal Average Average Variable Total (MC) Cost Cost ($) (AVC) (ATC) (s) (s) - Quantity Total Total (Q) Variable Cost Cost (TVC) (s) ($) b 0 30 1 33 2 38 3 48 4 64 5 84 5 114 7 150 B 190 9 240 a. Calculate the manufacturer's total variable costs (TVC), marginal costs (MC), and average variable costs (AVC). Fill in the TVC, MC, and AVC columns (Where necessary, round up all decimal values to the nearest tenth) (14 marks) b. Based on your results, how much is the company's efficient scale? (2 marks) 33 19 16 16 16.8 19 21.4 23.8 26.6 c. Assume that this manufacturer sells in a competitive market, and the industry price is $50 per modem. (1) Calculate its profit or loss and producer surplus. (9 marks) (ii) Is this a short-run or long-run equilibrium? Explain. (4 marks) d. Suppose the industry price falls to $10 per modem. (1) Calculate its profit or loss and producer surplus. (9 marks) (ii) What is the best production decision for this company? Explain. (4 marks)
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