Microeconomics

Problem 1:

Jacob decides to open a new ready-to-wear skirts brand. While making his study he noticed that his fixed cost of production is 175 dollars. The following table gives the other information:

Quantity of skirts	Variable cost	Fixed cost	Total cost	Total revenue	Profit
0	0
50	70
100	160
150	210
200	230
250	450

1. a)  What is the total cost of this production for each level of output level? Show your steps and fill in the table.

2. b)  The market price of skirts is 4 dollars. Find the profit of each output level in the table. Show your steps and fill in the table.

(15 points)

3. c)  At which level of output would Jacob be maximizing the profit?. Explain your answer

Problem 2:

Following the information on TC in problem 1. Jacob wants to do a marginal analysis to help him decide if he shall enter the market. Assume here that price of the market is 4

Quantity of skirts	Marginal cost	Marginal revenue	Net gain	Average cost
0	-	-	-	-
50
100
150
200
250

a)  Using the information in problem 1. Calculate marginal cost, marginal revenue and the net gain. Show your steps and conclude with the level output that maximizes the profit.

b)  Calculate the Average cost for each level of output. Conclude at which level of output do we have the minimum cost of output.

c) At 200 productions of skirts what is the profit of Jacob? Assess the profitability of Jacob (Breakeven, Gain or Loss). Explain.

d) According to your calculations, what is your advice for Jacob? Should he stay or leave the market? Explain your answer.