The computer company “Bits Are Us” produces affordable, easy-to-use home computer systems and has fixed costs of $250. The marginal cost of producing computers is $700 for the first computer, $250 for the second, $300 for the third, $350 for the fourth, $400 for the fifth, $450 for the sixth, and $500 for the seventh.

1. Create a table that shows the company’s output, total cost, marginal cost, average cost, variable cost, and average variable cost.

2. At what price is the zero-profit point? At what price is the shutdown point?

3. If the company sells the computers for $500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with average cost, marginal cost, and average variable cost curves to illustrate your answer and show the profit or loss.

4. If the firm sells the computers for $300, is it making a profit or a loss? How big is the profit or loss? Again, please provide a graph with average cost, marginal cost and average variable cost curves to illustrate your answer.