Profit maximizing output for competitive company

Reference no: EM1370238

Consider a company in a perfectly competitive market. The company has just built a plant that costs $15,000. Each unit of output requires $5 worth of materials. Each worker costs $3 per hour.

a. Based on the information above, fill in the following table. (Refer to the attachment for proper formatting of this chart)

Number of Worker Hours - Output (Q) Fixed Cost (FC) Variable Cost (VC) Total Cost (TC) Marginal Cost (MC) Average Variable Cost (AVC) Average Total Cost (ATC)
0 0
25 100
50 150
75 175
100 195
125 205
150 210
175 212
200 213

b. If the market price is $12.50, how many units of output will the firm produce if it wants to maximize its profit or minimize its losses?

c. At the price, what is the firm's profit or loss?

d. If the firm is losing money, should it shut down or continue producing at a loss? Support your answer with numbers.

e. If as a result of a change in the market conditions the price increases to $80, how many units of output will the firm produce if it wants to maximize its profit or minimize its loss? How much is the profit or loss.

Reference no: EM1370238

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