Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry. Table 12-5 shows the firm's cost schedule

Table 12-5

Quantity (cases) Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 $0 $76
1 30 106
2 50
3 134
4 140
5 160
6 114
7 150
8 190
9 316

Use the table to answer the following questions.
a. Complete Table 12-5 by filling in the blank cells.
b. Werner is selling in a perfectly competitive market at a price of $40. What is the profit maximizing or loss-minimizing output?
c. Calculate the firm's profit or loss.
d. Should the firm continue to produce in the short run? Explain.
e. If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase, decrease, or remain unchanged compared to your answer in b.
f. Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output?
g. Calculate the profit or loss. Should the firm continue to produce in the short run? Explain your answer.
h. Suppose the fixed cost remains at $76. What price corresponds to the shut-down point?
i. Suppose the fixed cost remains at $76. What price corresponds to the break-even point?

a.
Quantity (cases) Variable Cost Total Cost Marginal Cost Average Variable Cost Average Total Cost
0 $0 $76 -- -- $76
1 30 106 $30 $30 106
2 50 126 20 25 63
3 58 134 8 19.33 44.67
4 64 140 6 16 35
5 84 160 20 16.8 32
6 114 190 30 19 31.67
7 150 226 36 21.43 32.29
8 190 266 40 23.75 33.25
9 240 316 50 26.67 35.11

b. Quantity = 8 units.
c. Profit = $54.
d. Yes, it is earning an economic profit.
e. The profit-maximizing output will not change since marginal cost is not affected by changes in fixed cost.
f. Quantity = 5 units.
g. Loss = $60. Yes, it is loss-minimizing.
h. The shut-down point corresponds to a price of $16 and an output of 4 units.
i. The break-even point occurs at a price $31.67 and an output of 6 units.