Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Teacher’s Helper, Inc
Teacher’s Helper, Inc. (THInk) is a small company that produces instructional materials
for the New York City public schools. It has rented several rooms in an office building for
$600 a month, and has leased specialized computers for $480 a month, from SoftyWare.
Both are necessary for production. The table below shows the total variable costs for each
unit of output. (The blank columns are for your calculations, as needed.) Based on an.
exam question.
Output | Total
(modules} Variable
Costs
a
Po
Poa | 550 |
po
P 2 | wooo | CC
po
RD
a es
a
a ee
a 2 ss
pT
| 6 [| 300 | fT
a ee ee
| 7 [| 370 | OT
pT
a
Expert Solution
| Output (modules) | Total Variable | Fixed Cost (b) |
Total Cost (c = a+b) |
ATC (c/Output) |
AVC (a/Output) |
MC (Change in Total Cost/ Change in Total Output) |
|
| Costs (a) | |||||||
| 0 | 1080 | 1080 | |||||
| 1 | 550 | 1080 | 1630 | 1630 | 550 | 550 | |
| 2 | 1000 | 1080 | 2080 | 1040 | 500 | 450 | |
| 3 | 1400 | 1080 | 2480 | 826.67 | 466.67 | 400 | |
| 4 | 1850 | 1080 | 2930 | 732.5 | 462.5 | 450 | |
| 5 | 2400 | 1080 | 3480 | 696 | 480 | 550 | |
| 6 | 3000 | 1080 | 4080 | 680 | 500 | 600 | |
| 7 | 3700 | 1080 | 4780 | 682.8 | 528.57 | 700 | |
| 8 | 4500 | 1080 | 5580 | 697.5 | 562.5 | 800 |
a) THInk will increase output as long as Marginal cost is smaller than or equal to price to maximize profit (or minimize loss). In this case, MC($600)<Price (625) at output level of 6 units and MC($700)>Price ($625) at a output of 7 units. So, optimal output is 6 units.
Hence, THInk should produce 6 modules.
2) We can see that marginal cost of producing 7th unit of module is $700. So, THInk should charge a minimum of $700 for the 7th unit as charging a price of less than $700 will reduce the profit of firm.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
