Assume Chan. is a perfectly competitive firm, which produces baseball bats. Chanmpany seeks to maximize profits and uses the MR=MC RULE to find its profit maximizing (or loss minimizing) level of output. Total fixed costs (TFC) for Chan. are $235 and you have the following additional cost information.
output (Q) Total Costs (TC) Marginal Cost (MC)
0 $235 --
1 $300
2 $355
3 $405
4 $452
5 $500
6 $552
7 $610
8 $680
9 $760
10 $860
11 $990
12 $1,150
a. Fill in the column for MC to complete the table above.
b. Suppose that price is $130.
i) What is the profit maximizing (loss minimizing) level of output for Chan in the SR?
ii) Calculate the total economic profit (or loss) that Chan. would receive at this particular level of output. You must show all of your work to receive full credit
iii) Should this firm continue to produce or should it shut down in the short run? Why?
c. Assume instead that price is $70.
i) What is the profit maximizing (loss minimizing) level of output for Chan in the SR?
ii) Calculate the total economic profit (or loss) that Chan. would receive at this particular level of output. You must show all of your work to receive full credit
iii) Should this firm continue to produce or should it shut down in the short run? Why?