1. This table provides information on costs and output per hour of a small business producing t-shirts. Assume these are all the costs of this business. Fill in the table and answer the related question:

# of workers

Output

Marginal Product

Total Cost

ATC

Variable costs

AVC

0

0

---

60

---

---

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1

10

140

2

25

245

3

42

347

4

60

473

5

77

609

6

92

753

7

107

903

8

120

1059

9

130

1199

10

137

1311

Suppose the market price of a t-shirt (marginal revenue) is $10. What is the profit maximizing output of this shop (number of units only)? What is the profit (numberonly)? $

• Would you predict entry or exit to happen in this industry in the long run? Write the word entry or exit only.

• Find the shutdown point and the break-even point of this firm. Shutdown price $ , Break-even price $

• Now suppose that the price of a t-shirt decreases to $8. What is the profit maximizing level of output now? What is the profit? $ Should this firm continue producing or should it shut down? Type either "keep producing" or "shut down" with no quotation marks.

• The fixed costs of this firm suddenly increase by $40 per hour. How does this change the initial (price=$10) profit maximizing output? New output: What is the profit now? $