Bob produces DVD movies for sale, which requires a building and a machine that copies
Chapter 0, Problem 3(choose chapter or problem)
Bob produces DVD movies for sale, which requires a building and a machine that copies the original movie onto a DVD. Bob rents a building for $30,000 per month and rents a machine for $20,000 a month. Those are his fixed costs. His variablecosts per month are given in the accompanying table a. Calculate Bobs average variable cost, average total cost, andmarginal cost for each quantity of output.b.There is free entry into the industry, and anyone who enterswill face the same costs as Bob. Suppose that currently theprice of a DVD is $25. What will Bobs profit be? Is this along-run equilibrium? If not, what will the price of DVDmovies be in the long run?
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