Group exercise:

A. 1. Assuming a price per unit of Q of $180 fill in the following chart and graph accordingly.
2. Explain how much the firm will produce given  a price of $180 and show on both graphs.

Q	Total Cost	Variable Cost	Average Total Cost	Average Variable Cost	Marginal Cost	Total Revenue P= 180	Marginal Revenue	Profit P=180
0	$100,000
1000	$180,000
2000	$280,000
3000	$420,000
4000	$600,000
5000	$800,000

3. What will the firm do if the price drops to $140? Graph the TC/TR curve.

Q	Total Revenue	Profit P=140
0
1000
2000
3000
4000
5000

4. What will the firm do if the price drops to $ 80? Graph the ATC/MC curve.

Q	Total Revenue	Profit P= 80
0
1000
2000
3000
4000
5000

B. Suppose you decide to open a lemonade stand. You have the following information:

Costs:

Daily rental of a stand and sign is: $100.
Lemons $10 per lb.
Sugar    $5 per lb.
Cups    $10 for 500
Pitcher $20
Squeezer $20
Wages you could make as an accountant: $200/day.

Assume that:
Each lb of sugar and lemon produces 100 cups of lemonade.
You produce 500 cups of lemonade and sell each cup for $1.

1. Identify what your fixed and variable costs are in this example (assuming that the short run is a day and 500 cups of lemonade.)

Calculate:

2. economic profit.

3. accounting profit.