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Calculate average total cost at these different sales

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Reference no: EM131066004

Assume that a purely competitive firm is selling 2,000 television sets a day at a cost of $90,000. Assume that if the firm sells 1,600 units per day, its total cost would be $60,000, and if it sold 1,000 units per day, it would have a total cost of $55,000.

  1. Calculate the average total cost at these different sales levels.
  2. Assuming that the cost structure for every firm in the industry is identical, do you think that the industry could be in long-run equilibrium?
  3. If the industry is perfectly competitive, what would be the long-run equilibrium market price?
  4. If that price is the market price and every firm in the industry is earning a normal profit of 15%, what would be the profit?

Problem:

  1. If a hypothetical company has revenues less than its cost, should it shut down?
  2. If the company decides to shut down, is that decision final?
  3. Provide a real-world example to support your answer.

Reference no: EM131066004

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