ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
fast please      19. Refer to the diagram to the right which shows cost and demand curves facing a typical firm in a
constant−cost
perfectly competitive industry.
 
If the market price is​ $20, what is the amount of the​ firm's profit?
Part 2
 
A.
​$5,400
 
B.
​$6,750
 
C.
​$8,100
 
D.
​$16,200
The image depicts a graph illustrating the relationship between price/cost and quantity for a firm, with various economic curves such as Marginal Cost (MC), Average Total Cost (ATC), Average Variable Cost (AVC), and the Marginal Revenue (MR) represented. ### Description of Graph Components: **Axes:** - **X-axis (Horizontal):** Represents Quantity, ranging from 0 to approximately 1,800 units. - **Y-axis (Vertical):** Represents Price and Cost, ranging from 0 to 20. **Curves:** - **MC (Marginal Cost):** A positively sloped, red-colored line demonstrating the increase in cost with each additional unit produced. - **ATC (Average Total Cost):** An upward-sloping orange line that shows the average cost per unit. This curve tends to decrease initially but rises as quantity increases. - **AVC (Average Variable Cost):** This curve is slightly below the ATC, indicating variable costs per unit, also following an upward trend after decreasing initially. - **MR (Marginal Revenue):** A horizontal pink line at the price level of $14, signifying the revenue gained from selling one more unit. **Important Points and Lines:** - **Price Line:** A constant horizontal blue line drawn at $20 showing the firm's product price level. - **Intersection Points:** - The MR cuts the MC curve at Quantity 1,100. - The MC curve intersects the AVC at Quantity 1,350. - The MC curve crosses ATC at Quantity 1,800. **Observations:** - For quantities below 1,100, the marginal cost is lower than both the price and marginal revenue, suggesting the production is profitable. - At quantity 1,100, the profit-maximizing output is where MR = MC. - Beyond quantities of 1,350, the costs begin to rise faster as indicated by MC climbing above AVC and ATC. - At 1,800 units, the MC continues to rise above both ATC and AVC, indicating higher per-unit costs which may affect profitability. This graph is typically used in microeconomics to illustrate cost structures and assist in decision-making for optimal production and pricing strategies.
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Transcribed Image Text:The image depicts a graph illustrating the relationship between price/cost and quantity for a firm, with various economic curves such as Marginal Cost (MC), Average Total Cost (ATC), Average Variable Cost (AVC), and the Marginal Revenue (MR) represented. ### Description of Graph Components: **Axes:** - **X-axis (Horizontal):** Represents Quantity, ranging from 0 to approximately 1,800 units. - **Y-axis (Vertical):** Represents Price and Cost, ranging from 0 to 20. **Curves:** - **MC (Marginal Cost):** A positively sloped, red-colored line demonstrating the increase in cost with each additional unit produced. - **ATC (Average Total Cost):** An upward-sloping orange line that shows the average cost per unit. This curve tends to decrease initially but rises as quantity increases. - **AVC (Average Variable Cost):** This curve is slightly below the ATC, indicating variable costs per unit, also following an upward trend after decreasing initially. - **MR (Marginal Revenue):** A horizontal pink line at the price level of $14, signifying the revenue gained from selling one more unit. **Important Points and Lines:** - **Price Line:** A constant horizontal blue line drawn at $20 showing the firm's product price level. - **Intersection Points:** - The MR cuts the MC curve at Quantity 1,100. - The MC curve intersects the AVC at Quantity 1,350. - The MC curve crosses ATC at Quantity 1,800. **Observations:** - For quantities below 1,100, the marginal cost is lower than both the price and marginal revenue, suggesting the production is profitable. - At quantity 1,100, the profit-maximizing output is where MR = MC. - Beyond quantities of 1,350, the costs begin to rise faster as indicated by MC climbing above AVC and ATC. - At 1,800 units, the MC continues to rise above both ATC and AVC, indicating higher per-unit costs which may affect profitability. This graph is typically used in microeconomics to illustrate cost structures and assist in decision-making for optimal production and pricing strategies.
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