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-(Table: Total Cost and Output)Use Table: Total Cost and Output,which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm.If the market price of a tub of ice cream is $35,how many tubs of ice cream will Sergei produce in the short run?

Question

Use the following to answer question: 
-(Table: Total Cost and Output)Use Table: Total Cost and Output,which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm.If the market price of a tub of ice cream is $35,how many tubs of ice cream will Sergei produce in the short run?

Quizplus · Accepted Answer

To determine how many tubs of ice cream Sergei will produce, look at the column for Total Cost at a market price of $35. At an output of 3 tubs of ice cream, the total cost is $105 ($35 per tub x 3 tubs). This is the minimum point on the AVC curve (average variable cost), indicating that Sergei can minimize losses by producing 3 tubs. At any output level below 3 tubs, his total variable costs would still exceed his total revenue and he would incur losses. Therefore, the best choice is to produce 3 tubs in the short run.

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