Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per ) 100 90 80 70 60 50 40 30 20 10 0 ATC Z AVC 0 5 MC 10 15 20 25 30 35 40 QUANTITY (Thousands of pans) Price (Dollars per pan) 25.00 70.00 100.00 45 50 For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points (diamond symbols] on the graph to see precise information on average variable cost.) Quantity (Pans) ? 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 pan.
Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per ) 100 90 80 70 60 50 40 30 20 10 0 ATC Z AVC 0 5 MC 10 15 20 25 30 35 40 QUANTITY (Thousands of pans) Price (Dollars per pan) 25.00 70.00 100.00 45 50 For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points (diamond symbols] on the graph to see precise information on average variable cost.) Quantity (Pans) ? 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 pan.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
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 with 1 images
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
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education