Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 80 425, 60 ATC 30 20 AVC 10 MO-O 10 15 20 25 0 5 45 QUANTITY (Thousands of shirts) 50 For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Shirts) Profit or Loss? (Dollars per shirt) Produce or Shut Down? 10 20 32 40 50 0 60 On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) 100 20 Firm's Short-Run Supply 80 40 20 10+ 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of shirts) PRICE (Dolars per sh COSTS (Dollars)
Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 80 425, 60 ATC 30 20 AVC 10 MO-O 10 15 20 25 0 5 45 QUANTITY (Thousands of shirts) 50 For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Shirts) Profit or Loss? (Dollars per shirt) Produce or Shut Down? 10 20 32 40 50 0 60 On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) 100 20 Firm's Short-Run Supply 80 40 20 10+ 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of shirts) PRICE (Dolars per sh COSTS (Dollars)
Chapter23: Profit Maximization
Section: Chapter Questions
Problem 1E
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Question
Transcribed Image Text:On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds
to prices where there is positive output. (Note: You are given more points to plot than you need.)
100
90
Firm's Short-Run Supply
80
70
60
50
40
30
20
10 +
10
15 20
25
30
35
40
45
50
QUANTITY (Thousands of shirts)
Suppose there are 8 firms in this industry, each of which has the cost curves previously shown.
On the following graph, use the orange points (square symbol) to plot points along the portion of the industry's short-run supply curve that
corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plus
symbol) on the graph to indicate the short-run equilibrium price and quantity in this market.
Note: Dashed drop lines will automatically extend to both axes.
100
90
Industry's Short-Run Supply
80
Demand
70
Equilibrium
60
50
40
30
20
10
40
80
120
160
200 240 280 320 360
400
QUANTITY (Thousands of shirts)
At the current short-run market price, firms will
in the short run. In the long run,
PRICE (Dolars per shrt)
PRICE (Doliars per shirt)
Transcribed Image Text:Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average
variable cost (AVC) curves for a typical firm in the industry.
100
80
42.5, 60
ATC.
20
AVC
10
MO-O
10
15
20
25
30
35
40
50
QUANTITY (Thousands of shirts)
For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume
that when the price is exactly equal to the average variable cost, the firm is indiſferent between producing zero shirts and the profit-maximizing
quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will
make a profit, suffer a loss, or break even at each price.
Price
Quantity
(Shirts)
(Dollars per shirt)
Produce or Shut Down?
Profit or Loss?
10
20
32
40
50
60
On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds
to prices where there is positive output. (Note: You are given more points to plot than you need.)
100
90
Firm's Short-Run Supply
80
20
10
10
15
25
30
35
40
45
50
QUANTITY (Thousands of shirts)
PRICE (Dolars per shirt)
: 8 8 우 유
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