Introduction to Microeconomics assignment For Mr. Haydory Akbar Ahmed's class

1. Chapter 9
Problem 3:
Quantity
0
10
20
30
40
50
FC
100
100
100
100
100
100
VC
0
200
300
480
700
1000
TC
100
300
400
580
800
1100
ATC
30
20
19.33
20
22
AVC
20
15
16
17.5
20
MC
20
10
18
22
30
35
30
25
Price
20
ATC
15
AVC
MC
10
5
0
0
10
20
30
40
50
60
Quantity
b) The breakeven price is at the minimum point of ATC, which is 19.33. The shutdown price will be at the
minimum point of AVC, which is 15.
c) If Price (P) = 21, Kate makes a profit because we can see that P>ATC. She will continue producing.
d) If price (P) = 17, Kate is suffering a loss. Because we can see from the table that price is less than minimum
ATC. However, she will continue producing since P> min AVC (from the table). She can cover her variable cost
of production.
e) When P= 13 her TR= 13*16= 208 TC= 16*23= 368
VC= 16*16.5= 264
As we can see, her total revenue does not cover her total cost thus she runs at loss. Moreover it does not cover
her total variable cost to enable her to keep running her business, so she must shut down.

2. Problem 4
a.
Quantity
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
FC
50000
50000
50000
50000
50000
50000
50000
50000
50000
50000
50000
VC
0
5000
8000
9000
14000
20000
33000
49000
72000
99000
150000
TC
50000
55000
58000
59000
64000
70000
83000
99000
122000
149000
200000
ATC
AVC
MC
55
29
19.67
16
14
13.83
14.14
15.25
16.56
20
5
4
3
3.5
4
5.5
7
9
11
15
5
3
1
5
6
13
16
23
27
51
60
50
Price
40
30
ATC
AVC
20
MC
10
0
0
2000
4000
6000
8000
10000
12000
Quantity
b) Market price (P) is 23. In a perfectly competitive market the profit maximizing output is chosen where
MR=MC. So, Bob chooses to produce 8000 DVDs. So his profit is
TR
184000
TC
122000
Profit
62000
This is not the long run equilibrium. In the long run, there will be zero economic profit in a perfectly competitive
market. Hence, price should be equal to minimum ATC i.e. 13.33.