5. Ball Bearings, Inc. faces costs of production as follows: Total Fixed Costs $

Question

5. Ball Bearings, Inc. faces costs of production as follows: Total Fixed Costs $100 100 100 100 100 100 100 Total Variable Costs $0 50 70 90 140 200 360 Quantity 0 2 4 Calculate the company's average fixed costs, average variable costs, average total costs, and a. marginal costs at each level of production. b. The price of a case of ball bearings is $50. Seeing that he can't make a profit, the chief executive officer (CEO) decides to shut down operations. What is the firm's profit/loss? Was this a wise decision? Explain. Vaguely remembering his introductory economics course, the chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because c. marginal revenue equals marginal cost at that quantity. What is the firm's profit/loss at that level of production? Was this the best decision? Explain.

Explanation / Answer

ANSWER:

According to chegg q and a policy only 4 parts to be done at a time and your question a has 4 parts , hence i am solving them here, for answers to part b and c , please ask separately.

a)

total cost = total fixed cost + total variable cost

average fixed cost = total fixed cost / quantity

average variable cost = total variable cost / quantity

average total cost = total fixed cost / quantity

quantity total fixed costs total variable costs total costs average fixed costs average variable costs average total costs 0 100 0 100 - - - 1 100 50 150 100 50 150 2 100 70 170 50 35 85 3 100 90 190 33.33 30 63.33 4 100 140 240 25 35 60 5 100 200 300 20 40 60 6 100 360 460 16.67 60 76.67

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