Quantity Total Fixed Costs Total Variable Costs (Dollars) (Dollars) 0 180 0 1 180 80 2 180 140 3 180 180 4 180 240 5 180 320 6 180 450 the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production. Quantity Total Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) 0 1 2 3 4 5 6 The price of a case of ball bearings is $80. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations. The firm's profit in this case is . (Note: If the firm suffers a loss, enter a negative number in this cell.) True or False: This was a wise decision. True False Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity. At this level of production, the firm's profit is . (Note: If the firm suffers a loss, enter a negative number in this cell.). True or False: This is the best decision the firm can make. True False

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter4: Extent (how Much) Decisions

Section: Chapter Questions

Problem 3MC

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Ball Bearings, Inc., faces costs of production as follows:

Quantity	Total Fixed Costs	Total Variable Costs
(Dollars)	(Dollars)
0	180	0
1	180	80
2	180	140
3	180	180
4	180	240
5	180	320
6	180	450

the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production.

Quantity	Total Cost	Marginal Cost	Average Fixed Cost	Average Variable Cost
(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)
0

1

2

3

4

5

6

The price of a case of ball bearings is $80. Seeing that he can't make a profit, the company's chief executive officer (CEO) decides to shut down operations.

The firm's profit in this case is

. (Note: If the firm suffers a loss, enter a negative number in this cell.)

True or False: This was a wise decision.

True

False

Vaguely remembering his introductory economics course, the company's chief financial officer tells the CEO it is better to produce 1 case of ball bearings, because marginal revenue equals marginal cost at that quantity.

At this level of production, the firm's profit is

. (Note: If the firm suffers a loss, enter a negative number in this cell.).

True or False: This is the best decision the firm can make.

True

False

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