The table below shows the weekly marginal cost (MC) and average total cost (ATC) for Buddies, a perfectly competitive firm that produces novelty ear buds in a competitive market. The market price of ear buds is $6.00 per pair. Buddies Production CostsQuantity of Ear Buds MC ATC ($) ($)5 - 80 2 515 2.45 4.1520 3.55 425 4 430 5.5 4.2535 6 4.540 8.5 5A. If Buddies wants to maximize its profits, how many pairs of ear buds should it produce?B. At the profit-maximizing quantity, what is the total cost of producing ear buds?C. If the market price for ear buds is $6 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what is Buddies weekly profit?D. If the market price is $5.50 per pair, and Buddies produces the profit-maximizing quantity of ear buds, what is Buddies weekly profit?E. Buddies earns a normal profit whena. marginal cost equals average cost at the minimum of average cost. b. marginal cost equals average cost. c. marginal cost equals marginal revenue at the minimum of marginal cost. d. average cost equals average revenue at the minimum of average cost.

Answer and Explanation:

The computation is shown below:

a. The number of pairs of ear buds that should be produced for maximizing the profits is

As we know that

MR = MC

Q =  35

And also the price is equal to the MC

Hence, the quantity that should be produced would be 35

b). The total cost of producing ear buds for maximizing the profit is

As we know that

TC = ATC × Q

= 4.5 × 35

= $157.5

c. The weekly profit is

As we know that

Profit = TR - TC

= (P - ATC) × Q

= (6 - 4.5) × 35

= $52.5

d) The weekly profit is  

Profit= (5.5 - 4.25) × 30

= $37.5

e. The normal profit could be earned at the time when the marginal cost is equivalent to the average cost that contains the minimum

Hence, the option a is correct

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: