Reference no: EM131575047
Problem - Brenda Smith operates her own farm, raising chickens and producing eggs. She sells her eggs at the local farmers' market, where there are several other egg producers' also selling eggs by the dozen. (Brenda operates in a perfectly competitive market in which she is a "price taker.") In order to make sure she does not lose money on selling eggs, she does an analysis of her costs for producing eggs as shown on Table 4.a.
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Table 4.a.
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Dozens of eggs
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Fixed Cost
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Total Cost
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Variable Costs
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Average Variable Costs per dozen
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Average Total Costs per dozen
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0
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$3.35
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$3.35
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n/a
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n/a
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n/a
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10
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$3.35
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$10.50
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$7.15
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$0.72
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$1.05
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20
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$3.35
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$16.40
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$13.05
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$0.65
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$0.82
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30
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$3.35
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$23.10
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$19.75
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$0.66
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$0.77
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40
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$3.35
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$30.00
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$26.65
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$0.67
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$0.75
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50
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$3.35
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$36.50
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$33.15
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$0.66
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$0.73
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60
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$3.35
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$48.00
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$44.65
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$0.74
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$0.80
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70
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$3.35
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$64.40
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$61.05
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$0.87
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$0.92
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80
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$3.35
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$80.00
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$76.65
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$0.96
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$1.00
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90
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$3.35
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$135.00
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$131.65
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$1.46
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$1.50
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a. What is Brenda's break-even price for a dozen of eggs? Explain how you found that answer.
b. What is Brenda's shut-down price for a dozen of eggs? Explain how you found that answer.
c. If the market price of a dozen eggs at the local farmers' market is $1.45 per dozen, will Brenda make an economic profit? Explain how you determined your answer.
d. If the market price of a dozen eggs at the local farmers' market is $1.45 per dozen, should Brenda continue producing eggs in the short run? Explain how you determined your answer.
e. If the market price of a dozen eggs at the local farmers' market is 72 cents per dozen, will Brenda make an economic profit? Explain how you determined your answer.
f. If the market price of a dozen eggs at the local farmers' market is 72 cents per dozen, should Brenda continue producing eggs in the short run? Explain how you determined your answer.
g. If the market price of a dozen eggs at the local farmers' market is 64 cents per dozen, will Brenda make an economic profit? Explain how you determined your answer.
h. If the market price of a dozen eggs at the local farmers' market is 64 cents per dozen, should Brenda continue producing eggs in the short run? Explain how you determined your answer.