The table below represents the cost function of a poultry farm. The price of a crate of egg is $21. Use the information contained in the table to answer the questions that follow.
Quantity of eggs (in crates)
Total cost (in $)
0
50
1
55
2
62
3
75
4
96
5
125
6
162
7
203
8
248
(a) What Is the fixed cost of the farm? (2 marks] (b)(i) Calculate the marginal cost at each level of output. [9 marks] (ii) What is the profit maximizing output of the farm? [3 marks] (c) Draw the demand curve for the farm. [6 marks].
Explanation
(a)
Quantity of eggs (in crates)
Total cost (in $)
0
50
1
55
2
62
3
75
4
96
5
125
6
162
7
203
8
248
$50 (When output is zero, total cost is $50. This implioes that fixed cost is $5) (b) (i) MC = 50 MC = = = 5 OR MC = Missing argument for \frac = 5 MC = = = 7 MC = = = 13 MC = = = 21 MC = = = 29 MC = = = 37 MC = = = 41 MC = = = 45 (ii) The profit maximizing output is 4 crates of eggs. This is when MC = P (c) D=AR (AR = $21)
