4. Profit maximization in the cost-curve diagram Suppose that the market for black sweaters is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. In the short run, at a market price of $15 per sweater, this firm will choose to produceOn the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $15 andthe firm chooses to produce the quantity you already selected.Note: In the following question, enter a positive number, even if it represents a loss.The area of this rectangle indicates that the firm'ssweaters per day.would be $per day. PRICE (Dollars per sweater)5045403530252015105002MCATCAVC4 6 8 10 12 14QUANTITY (Thousands of sweaters)161820Profit or Loss?

Perfect competition: A firm in the competitive market is a price taker because it has large number…

Answered: In the short run, at a market price of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. Profit maximization in the cost-curve diagram

Suppose that the market for black sweaters is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.

Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that po

int.

In the short run, at a market price of $15 per sweater, this firm will choose to produce
On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $15 and
the firm chooses to produce the quantity you already selected.
Note: In the following question, enter a positive number, even if it represents a loss.
The area of this rectangle indicates that the firm's
sweaters per day.
would be $
per day.

PRICE (Dollars per sweater)
50
45
40
35
30
25
20
15
10
5
0
0
2
MC
ATC
AVC
4 6 8 10 12 14
QUANTITY (Thousands of sweaters)
16
18
20
Profit or Loss
?

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