# BU224M3 Impacts On Pricing And Production

Description

BU224M3-3: Examine how changes in the cost of production affect pricing and production quantity decisions of a firm in a perfectly competitive market.

GEL-8.02: Apply critical thinking to use principles of sound reasoning.

In this assessment, you will demonstrate your understanding and ability to define and calculate the six major cost elements of a business, when given the total costs and the quantity produced, as well as use the computed costs to determine a minimum cost output level for that business. In addition, you will compute both the break-even price and the shutdown price for a hypothetical business in a perfectly competitive market, determine if that business would incur an economic profit at various market prices, and if the business should continue to produce at each of those price levels. In addition, you will also clearly explain how the average total cost of a new output level is affected by its share of fixed costs and variable costs.

Directions:

Using the Word template provided in the Minimum Submission Requirements, answer the following questions based on the situation.

Questions

Table 1 shows an LED light bulb manufacturer’s total cost of producing LED light bulbs.

Table 1

 Cases of LED light bulbs produced in an hour Total Cost 0 \$4,500 10 \$4,900 20 \$5,100 30 \$5,300 40 \$5,400 50 \$5,700 60 \$6,700 70 \$7,900 80 \$9,700 90 \$11,800

1. What is this manufacturer’s fixed cost? Explain why.

2. Assuming that you only know the total costs (TC) (as is shown in the Table 1 above) explain how you would calculate each of the following:

a. Variable Cost (VC);

b. Average Variable Cost (AVC);

c. Average Total Cost (ATC);

d. Average Fixed Cost (AFC); and,

e. Marginal Costs (of a single case).

3. In Table 2, for each level of output, insert the following values into the table:

a. the Variable Cost (VC);

b. the Average Variable Cost (AVC);

c. the Average Total Cost (ATC); and,

d. the Average Fixed Cost (AFC).

Table 2

 Cases of LED light bulbs produced in an hour Total Cost Variable Costs Average Variable Costs Average Total Costs Average Fixed Cost a. b. c. d. 0 \$4,500 n/a n/a n/a 10 \$4,900 20 \$5,100 30 \$5,300 40 \$5,400 50 \$5,700 60 \$6,700 70 \$7,900 80 \$9,700 90 \$11,800

e. Given the information you computed in Table 2, what is the minimum cost output level? Explain why.

4. Brenda Smith operates her own farm raising chickens and producing eggs. She sells her eggs at the local farmers market where there are several other egg producers also selling eggs by the dozen. (Brenda operates in a perfectly competitive market in which she is a “price taker.”) In order to make sure she does not lose money on selling eggs, she does an analysis of her costs for producing eggs as shown on Table 3.

Table 3

 Dozens of eggs Fixed Cost Total Cost Variable Costs Average Variable Costs per dozen Average Total Costs per dozen 0 \$3.35 \$3.35 n/a n/a n/a 10 \$3.35 \$10.50 \$7.15 \$0.72 \$1.05 20 \$3.35 \$16.40 \$13.05 \$0.65 \$0.82 30 \$3.35 \$23.10 \$19.75 \$0.66 \$0.77 40 \$3.35 \$30.00 \$26.65 \$0.67 \$0.75 50 \$3.35 \$36.50 \$33.15 \$0.66 \$0.73 60 \$3.35 \$48.00 \$44.65 \$0.74 \$0.80 70 \$3.35 \$64.40 \$61.05 \$0.87 \$0.92 80 \$3.35 \$80.00 \$76.65 \$0.96 \$1.00 90 \$3.35 \$135.00 \$131.65 \$1.46 \$1.50

1. What is Brenda’s break-even price for a dozen eggs? Explain how you found that answer.
2. What is Brenda’s shut-down price for a dozen of eggs? Explain how you found that answer.
3. If the market price of a dozen eggs at the local farmers market is \$1.45 per dozen, will Brenda make an economic profit? Explain how you determined your answer.
4. If the market price of a dozen eggs at the local farmers market is \$1.45 per dozen, should Brenda continue producing eggs in the short-run? Explainhow you determined your answer.
5. If the market price of a dozen eggs at the local farmers market is 72 cents per dozen, will Brenda make an economic profit? Explain how you determined your answer.
6. If the market price of a dozen eggs at the local farmers market is 72 cents per dozen, should Brenda continue producing eggs in the short-run? Explainhow you determined your answer.
7. If the market price of a dozen eggs at the local farmers market is 64 cents per dozen, will Brenda make an economic profit? Explain how you determined your answer.
8. If the market price of a dozen eggs at the local farmers market is 64 cents per dozen, should Brenda continue producing eggs in the short-run? Explainhow you determined your answer.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.