What is the problem with the MC calculations? It is the change in total cost/change in quantity - that is what I did.
This is a table for a competitive market.
Fill in the following table:
Quantity Produced 0 1,000 2,000 3,000 4,000 5,000 6,000
Fixed Cost
Variable Cost 0 1,250 1,600 3,750 6,750 12,000 18,000
Total Cost
Marginal Cost
AVC
ATC
800 800 800 800 800 800 800
800 2,050 2,400 4,550 7,550 12,800 18,800
1.25 0.35 2.15 3 5.25 6
1.25 0.8 1.25 1.69 2.4 3
2.05 1.2 1.52 1.89 2.56
Answer these questions, providing an explanation for each answer:
(1) Given that the price is $2 per yard, how much should they produce and sell (assuming they are restricted to the choices here)? (Justify this both with marginal cost and marginal revenue reasoning and a "brute force" profit calculation.)
(2) At what price should Thinkamajig consider a temporary shutdown?
(3) At what price should Thinkamajig consider exiting the industry?
(5) If Thinkamajig is a "typical" firm (that is, other firms have similar costs to Thinkamajig), where will prices end up in the long run?
(6) Once prices stabilize, how much should Thinkamajig plan to produce?
(7) If, at the stable price point, there is a demand for 10 million yards of twill fabric per day, how many firms will be operating?