2. Extended Problems
Quantity
Total cost
(gallons per day) (dollars per day)
0
500
100
713
200
800
300
838
400
900
500
1,063
600
1,400
2.1) Brennan's Farm produces and sells milk. The market for milk is perfectly competitive. The market
price of milk is $2.50 per gallon. The relationship between the farm's output and total costs is shown
in the table above.
a) Draw Brennan's average variable, average total, and marginal cost curves.
b) Suggest Brennan for the break-even point
c) Use your graphs to find Brennan's profit-maximizing output.
d) If Brennan maximizes his profit, how much profit does he make?
e) Should Brennan stay in business? Will other farms with costs the same as Brennan's enter the
milk market? Explain.
