Ted is a producer in the perfectly competitive market for sandwiches. Ted produc

Question

Ted is a producer in the perfectly competitive market for sandwiches. Ted produces his profit-maximising quantity of 55 sandwiches at the market price of $4.00 per sandwich. At this output, his average variable cost is $2.80 per sandwich and his average total cost is $3.10 per sandwich. His minimum average variable cost is $2.70 per sandwich. Select the item from the list provided to make the following statements true 1. $0.30 2. $4.00 per sandwich 3. $154 4. $170.50 Y The total variable cost Ted will incur at his profit maximising production level is. Ted's average fixed cost at his profit maximising production level is If the market price begins to drop below 54.00 per sandwich, and Ted's costs remain unchanged, 5. $154 per sandwich Ted will need to shut down if the market price falls to below. 6. $49.50 7. $1.10 per sandwich 8. 0.30 per sandwich 9 $148.50 10.50.40 per sandwich 11. S3.10 per sandwich 12. $2.70 per sandwich

Explanation / Answer

(1) Total variable cost = $154

[Total variable cost = Average variable cost (AVC) x Quantity = $2.8 x 55 = $154]

(2) Average fixed cost = $0.3

[Average fixed cost = Average total cost - Average variable cost = $3.1 - $2.8 = $0.3]

(3) Ted will shut down if price fall below $2.70 per sandwich.

[Ted will shut down if price falls below the minimum average variable cost which is $2.7 per sandwich]

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