3. Karen runs a print shop that makes posters for large compa nies. It is a very

Question

3. Karen runs a print shop that makes posters for large compa nies. It is a very competitive business. The market price is currently SI per poster. She has fixed costs of $250. Her variable costs are $1,000 for the first thousand posters, $800 for the second thousand, and then $750 for each additional thousand posters. What is her AFC per poster (not per thousand!) if she prints 1,000 posters? 2,000? 10,000? What is her ATC per poster if she prints 1,000? 2,000? 10,000? If the market price fell to 70 cents per poster, would there be any output level at which Karen would not shut down pro- duction immediately? LO10.5

Explanation / Answer

ans....
a.
AFC per poster (not per thousand!) if she prints 1,000 posters=250/1000=0.250
AFC per poster (not per thousand!) if she prints 2,000 posters=250/2000=0.125
AFC per poster (not per thousand!) if she prints 10,000 posters=250/10000=0.025
b.
What is her ATC per poster if she prints 1,000=(250+1000)/1000=1.250
What is her ATC per poster if she prints 2,000=(250+1000+800)/2000=1.025
What is her ATC per poster if she prints 10,000=(250+1000+800+750*8)/10000=0.805

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