# 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

(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

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