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Calculate the total cost-the average variable cost

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1. Gopal's catering service provides catered meals, and the catered meals industry is perfectly competitive. Gopal's machinery costs $100 per day and is the only fixed input. His variable cost consists of the wages paid to the cooks and the food ingredients. The variable cost per day associated with each level of output is given in the accompanying table.

Quantity of Meals Variable Cost

0 $ 0
10 $ 200
20 $ 300
30 $ 480
40 $ 700
50 $ 1000

a. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output.

b. What is the break-even price? What is the shut-down price?

c. Suppose that the price at which Gopal can sell catered meals is $21 per meal. In the short run, will Gopal earn a profit? In the short run, should he produce or shut down?

d. Suppose that the price at which he can sell catered meals is $17 per meal. In the short run, will he earn a profit? In the short run, should he produce or shut down?

e. Suppose that the price at which Kate can sell catered meals is $13 per meal. In the short run, will he earn a profit? In the short run, should he produce or shut down?

Reference no: EM132632057

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