Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. $$\begin{array} { | c | c | }
\hline \text { Number d kites Per Day } & \text { Tutal Cast Per Day (\$) } \
\hline 0 & 100 \
\hline 1 & 110 \
\hline 2 & 126 \
\hline 3 & 148 \
\hline 4 & 172 \
\hline 5 & 200 \
\hline 6 & 235 \
\hline
\end{array}$$
Should Ben shut down?

Question

Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. $$\begin{array} { | c | c | } 
\hline \text { Number d kites Per Day } & \text { Tutal Cast Per Day (\$) } \
\hline 0 & 100 \
\hline 1 & 110 \
\hline 2 & 126 \
\hline 3 & 148 \
\hline 4 & 172 \
\hline 5 & 200 \
\hline 6 & 235 \
\hline
\end{array}$$  
Should Ben shut down?

Quizplus · Accepted Answer

Ben should not shut down because as long as the revenue from selling kites covers the variable costs, it makes sense to continue production to contribute to fixed costs. The table shows total costs, but the difference between total costs at different production levels indicates variable costs. Since kites sell for $25 each, even at the lowest production levels, revenue exceeds the variable costs (the increase in total cost from producing one more kite), indicating Ben can cover his variable costs and contribute to fixed costs.

Suppose Ben Owns a Small Company That Makes Kites Should Ben Shut Down? A)Yes, Because His Economic Profit Is

Suppose Ben Owns a Small Company That Makes Kites Should Ben Shut Down?
A)Yes, Because His Economic Profit Is