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Ball Bearings, Inc. faces costs of production as
Chapter , Problem 5(choose chapter or problem)
Ball Bearings, Inc. faces costs of production as follows:
a. Calculate the company's average fixed costs, average variable costs, average total costs, and marginal costs at each level of production.
b. The price of a case of ball bearings is $50. Seeing that he can't make a profit, the chief executive officer (CEO) decides to shut down operations. What is the firm's profit/loss? Was this a wise decision? Explain.
c. Vaguely remembering his introductory economics course, the chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. What is the firm's profit/loss at that level of production? Was this the best decision? Explain.
Questions & Answers
QUESTION:
Ball Bearings, Inc. faces costs of production as follows:
a. Calculate the company's average fixed costs, average variable costs, average total costs, and marginal costs at each level of production.
b. The price of a case of ball bearings is $50. Seeing that he can't make a profit, the chief executive officer (CEO) decides to shut down operations. What is the firm's profit/loss? Was this a wise decision? Explain.
c. Vaguely remembering his introductory economics course, the chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. What is the firm's profit/loss at that level of production? Was this the best decision? Explain.
ANSWER:
Step 1 of 6
Q =Quantity
TFC = total fixed cost
TVC = total variable cost
AFC = average fixed cost
AVC = average variable cost
TC = total cost
ATC = Average total cost
MC = marginal cost
TR = total revenue
MR = marginal revenue
Profit: at all the production levels from 0 to 6 units loss is incurred.