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Suppose you want to start a new business and to do so you ask for a production projection based on fixed costs and variable costs:
Suppose you want to start a new business and to do so you ask for a production projection based on fixed costs and variable costs: (a) In following table below, complete requested information expressed in MM$. Determine TC, MC, ATC, AFC and AVC.
Q | FC | VC | TC | MC | ATC | AFC | AVC |
0 | 10 | 0 | |||||
1 | 10 | 5 | |||||
2 | 10 | 10 | |||||
3 | 10 | 15 | |||||
4 | 10 | 20 | |||||
5 | 10 | 25 | |||||
6 | 10 | 30 | |||||
7 | 10 | 35 |
b) Plot MC, ATC and AVC. Indicate at which PRICE level, in short term, entrepreneur participates in market.
c) At what level of PRODUCTION (Q) should firm close?
d) For what price level(s) are ECONOMIC LOSSES less than FIXED COST?
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