Economics - Average Cost, Total Cost and Profit Maximization

1.
A company that manufactures T-shirts produces and sells its products in a perfectly competitive T-shirts market. The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is
SMC=12-0.005Q+0.0000008Q^2

where Q is the number of T-shirts produced and sold each month. The Company will have a fixed cost of $2,000 per month.
a. What is:
(i). The total cost function for the company?

b. At what output level does average variable cost reach its minimum value? What is the value (in dollars) of the average variable cost at its minimum point?

c. How many T-shirts should the company produced and sell each month?

d. What is its monthly profit (loss)?

Solution Preview

A company that manufactures T-shirts produces and sells its products in a perfectly competitive T-shirts market. The manager forecasts the wholesale price of T-shirts next year to be $7.00. The firm's estimated marginal cost is
SMC=12-0.005Q+0.0000008Q^2

where Q is the number of T-shirts produced and sold each month. The Company will have a fixed cost of $2,000 per month.
a. What is:
(i). The total cost function ...

... a) They restrict entry into industries in which positive economic profits are being made. ... at $65, average total cost is $95, and average fixed cost is $30 ...

... a visual representation of data. a table of electronically stored data. a list of economic data. ... marginal profit equals average costs. total profit equals zero. ...

... c. until minimum average total cost is achieved. d. until economic profits are zero. ... 1. A monopoly faces the following demand curve and total cost curve: Q ...

Managerial Economics - Clarification. ... The production is generally set as minimum average cost (AC) in long ... can calculate the mark up (ie the selling price to be ...

... long - run and short - run average cost curves obtaining ... for them to reduce their cost of production ... quantity of output that maximizes economic profit, ie, the ...

... will earn (negative, positive, zero) _____ economic profits. ... its demand, or average revenue, curve ... maximized where total revenue equals total costs. ...

... that makes the price equal to the minimum average cost. Then all of them are making zero economic profits. ... firms will have to either increase total revenue or ...

...Average Total Cost = Total Cost/Output = TC/Q =AC. ... At this level, Price is greater than Average Cost. So, firm will be making economic profits. ...