Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the short run, assume the marginal cost of building new homes equals the market price of a new home when Bob builds 10 new homes. At this level of output, Bob's average fixed cost of building a new home is $210,000 and his average variable cost is $200,000 per home (so his average total cost is $410,000 per home). If new homes are selling for $190,000, should he continue to produce 10 new homes in the short run or shut down?
Bob is a general contractor in the construction industry. Suppose the construction industry is perfectly competitive. In the short run, assume the marginal cost of building new homes equals the market price of a new home when Bob builds 10 new homes. At this level of output, Bob's average fixed cost of building a new home is $210,000 and his average variable cost is $200,000 per home (so his average total cost is $410,000 per home). If new homes are selling for $190,000, should he continue to produce 10 new homes in the short run or shut down?
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter8: Perefect Competition
Section: Chapter Questions
Problem 5SQP
Related questions
Question
100%
Hello! Could I get this question written out and explained, step by step? Thank you so much.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning