Minimizing average total cost and maximizing profit

1. If Redstone wanted to minimize average total cost, it would produce how many units?

2. If Redstone wishes to maximize profit MARGIN, it should produce how many units.

3. What level of output should the manager of Redstone choose to produce? Explain briefly.

4. Now triple the fixed costs to 15,000 in your spreadsheet. How does this change your answer to question 3.

5. Suppose that Nancy Pelosi declares that clay fire pits are causing global warming, and demand for fire pits shrinks substantially in the U.S. (especially in California). Fire pit prices fall worldwide to $65. Now, the manager of Redstone should produce how many units? Explain your answer.

1. If Redstone wanted to minimize average total cost, it would produce how many units?
Redstone will produce 300 units at the lowest average total cost of $90 per unit.
2. If Redstone wishes to maximize profit MARGIN, it should produce how many units.
Redstone ...

Solution Summary

The minimizing average total cost and maximizing profits are examined. The level of outputs are given.

...maximizing or loss-minimizing output. ... 1. Assume the following cost data are ...Total Average Fixed Average Variable Average Total Marginal Product Cost Cost Cost...

...maximize its profit or minimize its loss? ... steps for calculating variable costs, total costs, average variable costs, average total cost and marginal costs. ...

... falls to $65, Redstine should produce 100 units to minimize the loss ... Here, I have considered original fixed cost of $5000. Average total cost is fully calculated ...

... $5.50 per unit, and its average fixed costs (AFC) equal ... firm's profit-maximizing (or loss minimizing) output (Q ... be the firm's decision at this price/output level ...

... 1. If Redstone wanted to minimize average total cost, it would ... to above table, ATC is minimized at Q ... Redstone should maximize its profits by increasing output ...

... We cannot speak about loss minimizing level with ...Average Total Cost = $5.00; Quantity sold = 5000 Units; Price ... Marginal Revenue = $4.00; Marginal Cost = $4.00: ...

... Determine Level of Production q at which A(q) is minimized. ... Maximum Profit and Minimum Average Cost. ... of a particular commodity can be sold and the total cost c(q ...

...profit-maximizing or loss-minimizing output is the Quantity where MR = MC. Graph 1: The market price, shown by the MR curve, is below the Average Total Cost...