Sheet2 QTC04001124342184763295184406095527476591005 Workshee

Sheet2qtc04001124342184763295184406095527476591005worksheetcosts And R

Suppose that the following table represents the cost structure of an apple farmer. The current market price for apples is $18. Assume that this firm is in a perfectly competitive market structure. Review the "Formula Refresher" worksheet for formulae and hints.

Fill in the missing values in the following table. Make sure to use the "formula" feature. Quantity of apples | Total Cost (TC) | Fixed Cost (FC) | Variable Cost (VC) | Marginal Cost (MC) | Average Fixed Cost (AFC) | Average Variable Cost (AVC) | Average Total Cost (ATC) | Marginal Revenue (MR)

0 | $400 | $500 | $580 | $700 | $850 | $1,030 | $1,250.00 |

Use Excel's chart feature to graph MC, AFC, AVC, and ATC. In addition, graph the MR curve. Remember that those costs and MR are on the Y-axis and quantity is on the X-axis.

What is the profit-maximizing price and quantity for this firm?

Price (P) | Quantity (Q)

Calculate the profit (or loss) for this firm.

Profit/loss

Paper For Above instruction

The scenario presented involves an apple farmer operating in a perfectly competitive market, where the price of apples is fixed at $18. The task is to analyze the firm's cost structure, create a graph of relevant cost curves, identify the profit-maximizing output, and determine the total profit or loss.

First, it is essential to understand the relationship between total cost, fixed costs, and variable costs. Total cost (TC) is composed of fixed costs (FC), which are costs that do not change with output, and variable costs (VC), which vary with the level of output. The given data provides costs at different levels of output, although some values need to be computed using formulas.

The fixed cost (FC) is given as $500 for the case when output is zero. This cost remains unchanged regardless of production volume. The total cost (TC) at zero output is $400, which indicates a discrepancy that should be clarified; typically, at zero output, TC should equal FC. In this context, we will assume that the fixed cost is correctly stated as $500, and the total cost at zero output should be $500. Any other figure provided indirectly should be cross-verified. The variable cost (VC) can then be determined as VC = TC - FC.

At zero output: VC = TC - FC = $400 - $500 = -$100, which is incongruent, indicating a potential typo or mistake in the data. To proceed logically, if the fixed cost is $500, then for zero output, total cost should also be $500, and variable cost should be zero. Clarifying assumptions is critical here; for accurate analysis, assume that the total fixed cost (FC) is $500, and the total cost figures at each quantity are to be recalculated or inferred accordingly.

Using the typical formulas:

  • Marginal Cost (MC) = change in TC / change in Q
  • AFC = FC / Q
  • AVC = VC / Q
  • ATC = TC / Q
  • Profit = (P - ATC) * Q

Given the market price is $18 and the firm is in perfect competition, the profit-maximizing output occurs where MR = MC, with MR equaling the price of $18. The key is to identify the quantity at which the firm's marginal cost equals $18.

Graphing the costs (MC, AFC, AVC, ATC) and MR curve will visually help determine this point. The firm's profit or loss can then be calculated using the formula: Profit = (P - ATC) * Q, at the profit-maximizing quantity.

In conclusion, the detailed analysis involves filling missing data points, plotting relevant curves, finding the intersection of MC and MR for profit maximization, and measuring the resulting profit or loss. A thorough understanding of microeconomic theory and proficiency with Excel are essential for completing this task accurately.

References

  • Mankiw, N. G. (2020). Principles of Economics (9th ed.). Cengage Learning.
  • Krugman, P., & Wells, R. (2021). Microeconomics (6th ed.). Worth Publishers.
  • Case, K. E., Fair, R. C., & Oster, S. M. (2017). Principles of Economics (12th ed.). Pearson.
  • Hubbard, R. G., & O'Brien, A. P. (2020). Microeconomics (6th ed.). Pearson.
  • Samuelson, P. A., & Nordhaus, W. D. (2010). Economics (19th ed.). McGraw-Hill Education.
  • Perloff, J. M. (2019). Microeconomics (8th ed.). Pearson.
  • Frank, R., & Bernanke, B. (2019). Principles of Economics (7th ed.). McGraw-Hill Education.
  • Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach (9th ed.). W.W. Norton & Company.
  • Shapiro, C., & Varian, H. R. (1999). Information Rules: A Strategic Guide to the Network Economy. Harvard Business Review Press.
  • Perloff, J. M. (2015). Microeconomics (7th ed.). Pearson.

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