Assume that a novelty T-shirt producer has determined that her firm’s weeklynshort-run cost data can be summarized by a linear total cost function. Currently, the firm’s fixed overhead costs (rent, depreciation, etc.) amount to $2,100 per week, and the variable expenses (labor, materials, energy) are $50 per unit of output (q) -- where t-shirt output is measured in dozens.
A. Specify and illustrate the firm’s total and per-unit cost functions over the range of output: 5 to 100 (you may use increments of 10 units). Be sure to use separate diagrams for the total and per-unit cost graphs
B. If the current market price is $120 per dozen, determine and illustrate the firm’s break-even quantity of output. Be sure to specify revenue and cost at this output.