Home » Suppose that Laylita sells empanadas at a perfectly competitive farmers’ market and that her total cost of producing empanadas is T C(q) = 40 + 0.

Suppose that Laylita sells empanadas at a perfectly competitive farmers’ market and that her total cost of producing empanadas is T C(q) = 40 + 0.

Suppose that Laylita sells empanadas at a perfectly competitive farmers’ market and that her total cost of producing empanadas is T C(q) = 40 + 0.1q 2 − 1 5 q where q is the total number of empanadas that she produces. Given this total cost function, her marginal costs of production are .2q − 1 5 .

(a) What is the average total cost of producing empanadas as a function of the quantity of empanadas produced?

(b) At what quantity, q ∗ , is the average total cost of producing an empanada minimized? What is the value of the average total cost at q ∗ ? (1/2 point)

(c) The price of an empanada is $4.20. What quantity of empanadas should Laylita produce to maximize her profit? If she remains open, what is her economic profit or loss? (1/2 point)

(d) Suppose that the price of an empanada falls to $3.00. What quantity of empanadas should Laylita produce to maximize her profit at this new price? If she remains open, what is her new profit or loss? (1/2 point) 

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