le Edit Create equilibrium? 5. Ball Bearings, Inc. faces costs of production as

ID: 1124044 • Letter: L

Question

le Edit Create equilibrium? 5. Ball Bearings, Inc. faces costs of production as follows: Total Fbxed Costs Total Variable Costs Quantity P Cover Page Half-title Page F Copyright Page P Title Page $100 100 100 100 100 100 100 50 70 90 140 200 360 4 Dedication Page About the author Brief Contents a. Calculate the company's average fixed costs average variable costs, average total costs, and marginal costs at each level of production. b. The price of a case of ball bearings is $50. Seeing that she can't make a profit, the Chief Executive Officer (CEO) decides to shut down operations. What are the firm's profits/ losses? Was this a wise decision? Explain. P Preface to the student eP Experience c. Vaguely remembering his introductory Mankiw The Power of Engagement P Economics economics course, the Chief Financial Officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. What are the fim's profits/losses at that level of production? Was this the best decision? Explain. CourseMate:.

Explanation / Answer

Quantity

(1)

Total Fixed Costs

(2)

Total Variable Costs

(3)

Total Costs

(2)+(3)

Average Fixed Costs

(2)/(1)

Average Variable Costs

(3)/(1)

Average Total Costs

{(2)+(3)}/(1)

Total Revenue

(P x Q)

Profits

(TR-TC)

a) ATC, AFC, AVC and marginal costs calculated as shown in the table above.

b) Yes the firm should shut down as the firm is not making any profit in the market.

c) Yes the frim should shut down at this level also as despite the fact that MR=MC, the firm is making a loss.