Jeannette has a wheat farm, and the wheat market is perfectly competitive. The market price of a bushel of wheat is $18, and Jeannette’s machinery costs $140 per day and is the only fixed input. Her variable cost consists of the wages paid to the farm workers, and the fertilizer. The variable cost per day associated with each level of output is given by the table below. Calculate the total cost, the average variable cost, the average total cost, and the marginal cost for each quantity of output. What is the break-even price and quantity? What is the shut-down price and quantity? If the price at which Jeannette can sell wheat is $16/bu., will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $12, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? If the price at which Jeannette can sell wheat is $8, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down? Q VC TC MC AVC ATC 0 0 10 160 20 220 30 300 40 420 50 580 60 780 70 1,020
Jeannette has a wheat farm, and the wheat market is
The market
Her variable cost consists of the wages paid to the farm workers, and the fertilizer. The variable cost per day associated with each level of output is given by the table below.
Calculate the total cost, the
What is the break-even price and quantity?
What is the shut-down price and quantity?
If the price at which Jeannette can sell wheat is $16/bu., will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?
If the price at which Jeannette can sell wheat is $12, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?
If the price at which Jeannette can sell wheat is $8, will Jeannette earn a profit in the short run? In the short run, should she produce or shut down?
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Q |
VC |
TC |
MC |
AVC |
ATC |
|
0 |
0 |
|
|
|
|
|
10 |
160 |
|
|
|
|
|
20 |
220 |
|
|
|
|
|
30 |
300 |
|
|
|
|
|
40 |
420 |
|
|
|
|
|
50 |
580 |
|
|
|
|
|
60 |
780 |
|
|
|
|
|
70 |
1,020 |
|
|
|
|
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