# XYZ.Industry currently has 600

XYZ.Industry currently has 600 firms, all of which have fixedcosts of 6400 and average variable cost as follows:Quantity AVC FC VC TC MC ATC4000 2 2 8000 4 12000 6 16000 8 20000 10 24000 12 a. Complete tale 1 by computing variable cost, total cost, marginalcost, and average total cost.b. Identify the shutdown and breakevenquantities. c. Identify the maximizig profitquantity d.Compute the profit if the market price is currently$10. e. Estimate the marketsupply f. find the break-even quantitySelect one:a.Quantity AVC FC VC TC MC ATC4000 2 6400 640000 6464002 2.028000 4 6400 2560000 25664006 4.0112000 6 6400 5760000 576640010 6.0066666716000 8 6400 10240000 10246400 14 8.00520000 10 6400 16000000 16006400 18 10.00424000 12 6400 23040000 23046400 22 12.0033333b. The shutdown quantity16000 c The maximizing profit quantity is 24000d. The firm profit is 41,520 e. the total supply is7,200,000 f. The Break-even quantity is between 12,000 and 16,000b.Quantity AVC FC VC TC MC ATC4000 2 6400 8000 14400 2 3.68000 4 6400 32000 38400 6 4.812000 6 6400 72000 78400 10 6.5333333316000 8 6400 128000 13440014 8.420000 10 6400 200000 20640018 10.3224000 12 6400 288000 29440022 12.2666667b. The shutdown quantity 4000c The maximizing profit quantity is 12000d. The firm profit is 41,520 e. the total supply is7,200,000 f. The Break-even quantity is between 4,000 and 8,000c.Quantity AVC FC VC TC MC ATC4000 2 6400 8000 14400 2 3.68000 4 6400 32000 38400 6 4.812000 6 6400 72000 78400 10 6.5333333316000 8 6400 128000 13440014 8.420000 10 6400 200000 20640018 10.3224000 12 6400 288000 29440022 12.2666667b. The shutdown quantity16000 c The maximizing profit quantity is 24000d. The firm profit is 41,520 e. the total supply is7,200,000 f. The Break-even quantity is between 12,000 and 16,000d.Quantity AVC FC VC TC MC ATC800 2 6400 1600 8000 2 101600 4 6400 6400 12800 6 82400 6 6400 14400 20800 10 8.666666673200 8 6400 25600 32000 14 104000 10 6400 40000 46400 18 11.64800 12 6400 57600 64000 22 13.3333333b. The shutdown quantity16000 c The maximizing profit quantity is 24000d. The firm profit is 41,520 e. the total supply is7,200,000 f. The Break-even quantity is between 12,000 and 16,000e.Quantity AVC FC VC TC MC ATC4000 2 6400 640000 6464002 2.028000 4 6400 2560000 25664006 4.0112000 6 6400 5760000 576640010 6.0066666716000 8 6400 10240000 10246400 14 8.00520000 10 6400 16000000 16006400 18 10.00424000 12 6400 23040000 23046400 22 12.0033333b. The shutdown quantity16000 c The maximizing profit quantity is 24000d. The firm profit is 41,520 e. the total supply is7,200,000 f. The Break-even quantity is between 12,000 and 16,000

Answer:

(a) The table is as follows

Quantity | AVC | FC | VC= AVC*Quantity | TC= VC+FC | MC= Change in TC/ Change in Quantity | ATC= TC/Quantity |

4000 | 2 | 6400 | 8000 | 14400 | 2 | 3.6 |

8000 | 4 | 6400 | 32000 | 38400 | 6 | 4.8 |

12000 | 6 | 6400 | 72000 | 78400 | 10 | 6.533333 |

16000 | 8 | 6400 | 128000 | 134400 | 14 | 8.4 |

20000 | 10 | 6400 | 200000 | 206400 | 18 | 10.32 |

24000 | 12 | 6400 | 288000 | 294400 | 22 | 12.27 |

(b) Shutdown price is when the average variable cost is minimumas below that, the variable costs will not get covered. Hence, AVCminimum is 2. Which is quantity= 4000 (Shutdown Quantity)

The breakeven price is the minimum of the Average Total Costwhich is at Quantity 4000: as let’s say the Price is 3.6 which isequal to the lowest ATC, then the Total Cost= 4000*Avg cost=4000*3.6

and the Total Revenue will be 40000*3.6 (Price) Hence, 0profit.

Therefore, the breakeven quantity is between 4000-8000

(C) Market Price is given as 10$

Hence, profit maximization is when Marginal Cost= MarginalRevenue= 10

Hence, Profit maximization is when MC=10, which is 12000quantity.

(d) Profit = Total Revenue- Total Cost (We will calculate at12000 units since maximum profit is at that quantity)

Profit= Price*Quantity- ATC*12000

Profit= 10*12000- 6.5333*12000= 120000- 6.54*12000= $41520

(e) Market Supply= Quantity at profit maximization * TotalNumber of firms ( As all firms would like to produce at profitmaximization quantities)

Market Supply= 12000*600= 7,200,000

(f)

The breakeven price is the minimum of the Average Total Costwhich is at Quantity 4000: as let’s say the Price is 3.6 which isequal to the lowest ATC, then the Total Cost= 4000*Avg cost=4000*3.6

and the Total Revenue will be 40000*3.6 (Price) Hence, 0profit.

Therefore, the breakeven quantity is between 4000-8000