Karen runs a print shop that makes posters for large companies. It is a very com
ID: 1257825 • Letter: K
Question
Karen runs a print shop that makes posters for large companies. It is a very competitive business. The market price is currently $1.00 per poster. She has fixed costs of $100.00. 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 if she prints 1,000 posters?
Instructions: Round your answer to two decimal places.
$
What is her AFC per poster if she prints 2,000 posters?
Instructions: Round your answer to three decimal places.
$
What is her AFC per poster if she prints 10,000 posters?
Instructions: Round your answer to three decimal places.
$
What is her ATC per poster if she prints 1,000?
Instructions: Round your answer to two decimal places.
$
What is her ATC per poster if she prints 2,000?
Instructions: Round your answer to three decimal places.
$
What is her ATC per poster if she prints 10,000?
Instructions: Round your answer to three decimal places.
$
If the market price fell to 70 cents per poster, would there be any output level at which Karen would not shut down production immediately? (Click to select)NoYes
Explanation / Answer
AFC = FC / Quantity printed
So, given she prints 1,000 posters: AFC = 100/1000 = $0.10
Given she prints 2,000 posters: AFC = 100/2000 = $0.05
Given she prints 10,000 posters: AFC = 100/10000 = $0.01
ATC = TC / Quantity printed
where TC = FC + Variable Cost
If she prints 1000: TC = 100 + 1000= $1100
ATC = 1100/1000 = $1.10
If she prints 2000: TC = 100 + 1000 + 800= 1900
ATC = 1900/2000 = $0.95
If she prints 10000: TC = 100 + 1000 + 800 + (750 * 8)= 7900
ATC = 7900/10000 = $0.79
No. Because at all levels the AVC is more than $0.70
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