production affect pricing and production quantity decisions of a firm in a perfectly competitive market.

Assignment 8 In this Assignment, you will be assessed on the followin" rel="nofollow">ing outcomes: AB224-3: Examin" rel="nofollow">ine how changes in" rel="nofollow">in the cost of production affect pricin" rel="nofollow">ing and production quantity decisions of a firm in" rel="nofollow">in a perfectly competitive market. GEL-8.5: Apply critical thin" rel="nofollow">inkin" rel="nofollow">ing to the field of study. Assignment In this Assignment, you will defin" rel="nofollow">ine and calculate the remain" rel="nofollow">inin" rel="nofollow">ing six major cost elements of a busin" rel="nofollow">iness, when given the Total Costs and the Quantity Produced, as well as to use the computed costs to determin" rel="nofollow">ine a min" rel="nofollow">inimum cost output level for that busin" rel="nofollow">iness. In addition, you will compute both the break-even price and the shut-down price for a hypothetical busin" rel="nofollow">iness in" rel="nofollow">in a perfectly competitive market, and determin" rel="nofollow">ine if that busin" rel="nofollow">iness would in" rel="nofollow">incur an economic profit at various market prices, and should the firm contin" rel="nofollow">inue to produce at each of those price levels. Questions Table 2.a. shows an LED light bulb manufacturer’s total cost of producin" rel="nofollow">ing LED light bulbs. Table 2.a. Cases of LED light bulbs produced in" rel="nofollow">in an hour Total Cost 0 $4,500 10 $4,900 20 $5,100 30 $5,300 40 $5,400 50 $5,700 60 $6,700 70 $7,900 80 $9,700 90 $11,800 1. What is this manufacturer’s fixed cost? Explain" rel="nofollow">in why. 2. Assumin" rel="nofollow">ing that you only know the Total Costs (TC) (as is shown in" rel="nofollow">in the Table 2.a. above) explain" rel="nofollow">in how you would calculate each of the followin" rel="nofollow">ing: a. Variable Cost (VC); b. Average Variable Cost (AVC); c. Average Total Cost (ATC); d. Average Fixed Cost (AFC); and, e. Margin" rel="nofollow">inal Costs (of a sin" rel="nofollow">ingle case). 3. In Table 3.a., for each level of output, in" rel="nofollow">insert in" rel="nofollow">into the table the values for: a. the Variable Cost (VC); b. the Average Variable Cost (AVC); c. the Average Total Cost (ATC); and, d. the Average Fixed Cost (AFC). Table 3.a. Cases of LED light bulbs produced in" rel="nofollow">in an hour Total Cost Variable Costs Average Variable Costs Average Total Costs Average Fixed Cost a. b. c. d. 0 $4,500 n/a n/a n/a 10 $4,900 20 $5,100 30 $5,300 40 $5,400 50 $5,700 60 $6,700 70 $7,900 80 $9,700 90 $11,800 e. Given the in" rel="nofollow">information you computed in" rel="nofollow">in Table 3.a., what is the min" rel="nofollow">inimum cost output Level? Explain" rel="nofollow">in why. 4. Brenda Smith operates her own farm, raisin" rel="nofollow">ing chickens and producin" rel="nofollow">ing eggs. She sells her eggs at the local farmers’ market, where there are several other egg producers’ also sellin" rel="nofollow">ing eggs by the dozen. (Brenda operates in" rel="nofollow">in a perfectly competitive market in" rel="nofollow">in which she is a “price taker.”) In order to make sure she does not lose money on sellin" rel="nofollow">ing eggs, she does an analysis of her costs for producin" rel="nofollow">ing eggs as shown on Table 4.a. Table 4.a. Dozens of eggs Fixed Cost Total Cost Variable Costs Average Variable Costs per dozen Average Total Costs per dozen 0 $3.35 $3.35 n/a n/a n/a 10 $3.35 $10.50 $7.15 $0.72 $1.05 20 $3.35 $16.40 $13.05 $0.65 $0.82 30 $3.35 $23.10 $19.75 $0.66 $0.77 40 $3.35 $30.00 $26.65 $0.67 $0.75 50 $3.35 $36.50 $33.15 $0.66 $0.73 60 $3.35 $48.00 $44.65 $0.74 $0.80 70 $3.35 $64.40 $61.05 $0.87 $0.92 80 $3.35 $80.00 $76.65 $0.96 $1.00 90 $3.35 $135.00 $131.65 $1.46 $1.50 a. What is Brenda’s break-even price for a dozen of eggs? Explain" rel="nofollow">in how you found that answer. b. What is Brenda’s shut-down price for a dozen of eggs? Explain" rel="nofollow">in 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" rel="nofollow">in how you determin" rel="nofollow">ined your answer. d. If the market price of a dozen eggs at the local farmers’ market is $1.45 per dozen, should Brenda contin" rel="nofollow">inue producin" rel="nofollow">ing eggs in" rel="nofollow">in the short run? Explain" rel="nofollow">in how you determin" rel="nofollow">ined 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" rel="nofollow">in how you determin" rel="nofollow">ined your answer. f. If the market price of a dozen eggs at the local farmers’ market is 72 cents per dozen, should Brenda contin" rel="nofollow">inue producin" rel="nofollow">ing eggs in" rel="nofollow">in the short run? Explain" rel="nofollow">in how you determin" rel="nofollow">ined 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" rel="nofollow">in how you determin" rel="nofollow">ined your answer. h. If the market price of a dozen eggs at the local farmers’ market is 64 cents per dozen, should Brenda contin" rel="nofollow">inue producin" rel="nofollow">ing eggs in" rel="nofollow">in the short run? Explain" rel="nofollow">in how you determin" rel="nofollow">ined your answer. Discussion 9 Topic: Real-World Monopolies Describe an example of a real-world in" rel="nofollow">industry or market that would be considered by economists to be a natural monopoly. 1. What characteristics of the in" rel="nofollow">industry make it a monopoly? 2. What is the impact of the monopoly power on its customers? 3. Why might government want to regulate natural monopolies? 4. How might such regulation be structured?