The following graph plots daily cost curves for a firm operating in the competitive market for instant pots. PRICE (Dollars per instant pot) 100 90 80 70 60 50 40 30 20 10 0 0 D 5 25.00 70.00 Price (Dollars per instant pot) MC 100.00 ATC AVC 10 15 20 25 30 35 40 QUANTITY (Thousands of instant pots) Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Quantity (Instant pots) 45 50 Total Revenue Fixed Cost (Dollars) (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per instant pot.
The following graph plots daily cost curves for a firm operating in the competitive market for instant pots. PRICE (Dollars per instant pot) 100 90 80 70 60 50 40 30 20 10 0 0 D 5 25.00 70.00 Price (Dollars per instant pot) MC 100.00 ATC AVC 10 15 20 25 30 35 40 QUANTITY (Thousands of instant pots) Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Quantity (Instant pots) 45 50 Total Revenue Fixed Cost (Dollars) (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per instant pot.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section: Chapter Questions
Problem 3PA
Related questions
Question
![The following graph plots daily cost curves for a firm operating in the competitive market for instant pots.
PRICE (Dollars per instant pot)
100
90
80
70
60
50
40
30
20
10
0
0
D
5
25.00
70.00
Price
(Dollars per instant pot)
MC
100.00
ATC
AVC
10 15 20 25 30 35 40
QUANTITY (Thousands of instant pots)
Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to
determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent
between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average
variable cost information.)
Quantity
(Instant pots)
45
50
Total Revenue Fixed Cost
(Dollars) (Dollars)
1,600,000
1,600,000
1,600,000
Variable Cost
(Dollars)
Profit
(Dollars)
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it
shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease).
This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is
per instant pot.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8966d557-1bf7-4b01-9b8f-87009c51c7c5%2F9f1b7173-dd33-4d66-afd9-dfb5672a2bc9%2Fiz3x51t_processed.png&w=3840&q=75)
Transcribed Image Text:The following graph plots daily cost curves for a firm operating in the competitive market for instant pots.
PRICE (Dollars per instant pot)
100
90
80
70
60
50
40
30
20
10
0
0
D
5
25.00
70.00
Price
(Dollars per instant pot)
MC
100.00
ATC
AVC
10 15 20 25 30 35 40
QUANTITY (Thousands of instant pots)
Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to
determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent
between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average
variable cost information.)
Quantity
(Instant pots)
45
50
Total Revenue Fixed Cost
(Dollars) (Dollars)
1,600,000
1,600,000
1,600,000
Variable Cost
(Dollars)
Profit
(Dollars)
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 per day. In other words, if it
shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as the expiration of a building lease).
This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is
per instant pot.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
