Shutdown point and the minimum average cost

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1. Sleeping bag production for the Sleepwell Company has cost.

The marginal cost curve for their production is MC(Q) = 3- 20Q + 35.

a) Identify both the shutdown point and the minimum average cost. (Hint: if you have access to a spreadsheet program, you may find it easier if you put into it the formulas for AVC, AC, and MC for values from Q = 1 to Q = 10)

Note that FC = C(Q = 0) = 196; Entries for AC(0) and AVC(0) are empty because averaging would involve dividing by zero.

b) The price of a sleeping bag is currently $67. How many sleeping bags will Sleepwell produce? What will be its profits?

Reference no: EM132460864

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