Every night, the Yatala Drive-In screens movies can be enjoyed by customers from

Question

Every night, the Yatala Drive-In screens movies can be enjoyed by customers from the comfort of their cars. Assume the market for popcorn is perfectly competitive. Mindy is a producer who sells 27 popcorn buckets, which is her profit maximising output. At this profit-maximising output level, Mindy's average total cost is $3.30 per popcorn bucket. Her minimum average variable cost is $3.10 per popcorn bucket. The market price is $3.50 per popcorn bucket. Answer the following questions a. Mindy's economic profit or loss is (use a negative value if a loss). Answer in dollars, rounded to two decimal places (ie: to the nearest cent) b. State whether the following statement is true or false: "Mindy's marginal cost is $3.30 per popcorn bucket." Type T for true, or F for false c. At the current market price, should Mindy shut down? Type Y for Yes, or N for No

Explanation / Answer

a)
Answer
Economic profit=TR-TC
TR=P*Q
=27*3.5
=94.5
TC=ATC*Q
=3.3*27
=89.1
Profit=94.5-89.1=5.4
Mindy's economic profit is $5.4
---------
b)
False
The marginal cost is the cost of an additional output but it is average total cost.
c)
No
Mindy is earning the profit so he/she should continue to produce it.

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