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Using the following graph: Dollars 10 MC ATC 6 AVC 5 3 75 100 150 Quantity 1
Using the following graph: Dollars 10 MC ATC 6 AVC 5 3 75 100 150 Quantity 1. Find the shutdown point. What is the quantity produced average total cost, average variable cost; total cost, total variable costs and profit (loss) at this point? 2. Find the break-even point. What is the quantity produced average total cost, average variable cost; total cost, total variable cost and profit (loss) at this point? 3. IfMR-10, then what is the quantity produced, average total cost, average variable cost, total cost, total variable cost and profit (loss) at this point? 4. What do you think are the main costs of a food ser business? 5. Use the following table to explain and plot the main portions of food dollar used by Dorfman, 2007
Problem Set Four for CAMS2003 Using the following graph: Dollars 10 MC ATC 6 AVC 5 3 75 100 150 Quantity 1. Find the shutdown point. What is the quantity produced, average total cost, average variable cost; total cost, total variable costs and profit (loss) at this point? 2. Find the break-even point. What is the quantity produced, average total cost, average variable cost; total cost, total variable cost and profit (loss) at this point? 3. If MR = 10, then what is the quantity produced, average total cost, average variable cost, total cost, total variable cost and profit (loss) at this point?
4.What do you think are the main costs of a food service business? 5. Use the following table to explain and plot the main portions of food dollar used by Dorfman, 2007: Cost Item Per cent of costs Labour 52 Materials and Supplies 4 Utilities Repairs B Advertising 4 Lease and Rent 8 Taxes and Fees Depreciation Other (include food ingredients) 14.5
Expert Solution
- The shutdown point is the point of minimum AVC in the graph. This happens when Q = 75, P = $3, Below $3 the firm will cease to operate in the short ran as it is unable to cover even its variable costs of production. Total variable costs = AVC*Q = 3*75= $225. Total cost = 75*$5 = $375. Loss = Revenue – Cost = 225-375 = -$150. Negative sign indicates that the firm will suffer a loss at a price of $3, which is also the shut down price. Fixed Cost = TC-VC = 375-225 = 150.
- Break Even point is the point at which price equals to the minimum Average total cost (P=ATC). ATC $5, VC = 350, AVC = 350/100 $3.5. At Q=100, P=ATC=$5.) Total Revenue = 5*100 = $500, Total Cost = 5*100 = $500, Profit = $500-500 = 0.
- If MR=10, then quantity produced Q* =150 units, ATC = $6, TC = 6*150 (ATC*Q) = 900, FC = 150, VC = 750 (900-150), AVC = 750/150 = $5. Profits = 150*10-6*150 = 1500-900 = $600
- The main costs for a food service business will be Wages and Salaries (Variable), Rent (Fixed), Raw material (Variable), Ovens and other equipments (Fixed), electricity charges (variable) etc.
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