Essentials of Economics 7th Edition by Gregory Mankiw

تمرين 5

Ball Bearings Inc. faces costs of production as follows:

a. Calculate the company's average fixed costs, average variable costs, average total costs, and marginal costs.
b. The price of a case of ball bearings is $50. Seeing that she can't make a profit, the Chief Executive Officer (CEO) decides to shut down operations. What are the firm's profits/ losses? Was this a wise decision? Explain.
c. Vaguely remembering his introductory economics course, the Chief Financial Officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. What are the firm's profits/losses at that level of production? Was this the best decision? Explain.