average cost, average variable cost, marginal cost, and price
Not what you're looking for?
A manufacturer of electronics products is considering entering the telephone equipment business. It estimates that if it were to begin making wireless telephones, its short-run cost function would be as follows.
Q(thousands) AVC AC MC _____________________________________________________________________
9 41.10 52.21 30.70
10 40.00 50.00 30.10
11 39.10 48.19 30.10
12 38.40 46.73 30.70
13 37.90 45.59 31.90
14 37.60 44.74 33.70
15 37.50 44.17 36.10
16 37.60 43.85 39.10
17 37.90 43.78 42.70
18 38.40 43.96 46.90
19 39.10 44.36 51.70
20 40.00 45.00 57.10
a. Plot the average cost, average variable cost, marginal cost, and price on a graph
b. Suppose the average wholesale price of a wireless phone is currently $50. Do you think this company should enter the market? Explain. Indicate on the graph the amount of profit (or loss) earned by the firm at the optimal level of production.
c. Suppose the firm does enter the market and that over time increasing competition causes the price of telephones to fall to $35. What impact will this have on the firm's productions levels and profit? Explain what would you advise this firm to do?
Purchase this Solution
Solution Summary
Plot the average cost, average variable cost, marginal cost, and price on a graph.
Solution Preview
a. Plot the average cost, average variable cost, marginal cost, and price on a graph
b. Suppose the average wholesale price of a wireless phone is currently $50. Do you think this company should enter the market? Explain. Indicate on the graph the ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.