Seard 14 Firms in competitive markets Homework Assignment

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Seard 14 Firms in competitive markets Homework Assignment < Back to Assignment Attempts: 0 0 Keep the Highest: 0/17 4. Profit maximization in the cost-curve diagram Aa Aa Consider a perfectly competitive market for black hoodies. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per hoodiel 20 Profit or Loss MC 16 ATC 12 AVC 4 2 4 6 8 10 12 OUTPUT (Thousands of hoodies Help Clear All In the short run, at a market price of $8 per hoodie, this firm will choose to produce hoodies per day MindTap - Ceng CENGAGE MINDTAP Q Search 14 Firms in competitive markets Homework Assignment In the short run, at a market price of $8 per hoodie, this firm will choose to produce hoodies per day. On the previous graph, use the blue rectangle (circle symbols) to shade the area representing the firm's economic profit or loss of the market price is $8 and the firm chooses to produce the quantity you already selected. Tooltip: Mouse over the shaded region on the graph to see its area. The area of this rectangle indicates that the firm would have per day. For each price in the following table, calculate the firm's optimal quantity of units produced and determine the economic profit or loss if it produces at that quantity. Use the data from the previous graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Note: You can mouse over the purple points (diamond symbols) on the previous graph to see precise information on average variable cost.) Price (P) Quantity (Q) Total Revenue CTR = R x C) Variable Cost (VC), Profit (TR - TC) $6 Fixed Cost (FC) $27,000 27,000 27,000 12 18 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the fixed cost of the firm producing black hoodies is $27,000 per day. In other words, if it shuts down, the firm would suffer losses of $27,000 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 downs per hoodie For each price in the following table, calculate the firm's optimal quantity of units produced and determine the economic profit or loss if it produces at that quantity. Use the data from the previous graph to identify its total variable cost. Assume that if the firm is Indifferent between producing and shutting down, it will produce. (Note: You can mouse over the purple points (diamond symbols) on the previous graph to see precise Information on average variable cost.) Price (P) Quantity (Q) Total Revenue (TR = P x 2) Variable Cost (VC) Profit (TR - TC) $6 12 18 Fixed Cost (FC) $27,000 27,000 27,000 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the fixed cost of the firm producing black hoodies is $27,000 per day. In other words, if it shuts down, the firm would suffer losses of $27,000 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 downris per hoodie. ONA 100 All All rights reserved Coolamine 20 Compras no All Grade It Now Save & Continue Continue without saving 29 Aa

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4 3000

In a perfectly competitive economy marginal cost curve cuts the average total cost curve at its minimum point, and same happens with the average variable cost.

So equilibrium output would be 6 and price would be 12.

in the short run a perfectly competitive firm should cover its average variable cost so in the short run the firm must get minimum of $6 at 3 unit of output.

so at the price of $1 per unit the firm is ready to produce 3000 units of hoodies.

Price (P) 6 TR: 0 18 ооо 3 оро Gooo 6. 19 000 FC 7000 | Soo боо 21 бо о Profit - 1ЧSoo ЗЧ,000 бЧs 00 18 ToBooo Пј00 о 16 Гоо

shutdown point is 3000 units of hoodies, because below this point, firm is unable to cover its variable cost even.

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Seard 14 Firms in competitive markets Homework Assignment < Back to Assignment Attempts: 0 0 Keep...

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