Question

A special shoe manufacturer ABC Co. has costs of production as follows :

Quantity 0 1 2 3 4 5 6

Total Variable Cost ($) 0 50 70 90 140 200 360



a. ABC Co.’s fixed costs are $100. Calculate average fixed costs, average variable costs, average total costs and marginal costs at each level of production. (2 Marks)

b. Draw the company’s cost curves in a clearly labelled graph. (1 Mark)

c. The price of ABC shoe is $50. What are the company’s profits? In case of loss, should the CEO continue operations or decide to shut-down? Which would be a wise decision? Explain. (1 Mark)

d. The chief financial officer tells the CEO that it’s better to produce only one shoe this month. What could be the reason for this advice by the CFO? What are the firm’s profits at that level of production? Is this the best decision? Explain. (1 ​

Answer 1

Answer:

bfn usi Usb cru eh I rhn bhti pic ery ab sb sb rh tum ox jnv its us ic txtn tb hn hn in I tc