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70 60 ATC 50 40 30 20 AVC MC O 10 5 10 15 20 25 30 35 40 45 50 (Thousands of jackets) ANT each price in the following table, use the graph to determine the number of jackets this firm would produce in order to maximize its profit. Assume when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing tity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will e a profit, suffer a loss, or break even at each price. Price Quantity ollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? Shut down Shut down 10 20,000 Loss 20 10,000 Loss 32 5,000 Shut down Loss 40 Either 0 or 37,500 Produce Loss 50 40,000 Produce Loss 60 Either 0 or 42,500 Produce Loss COSTS (Dollars)

70 60 ATC 50 40 30 20 AVC MC O 10 5 10 15 20 25 30 35 40 45 50 (Thousands of jackets) ANT each price in the following table, use the graph to determine the number of jackets this firm would produce in order to maximize its profit. Assume when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing tity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will e a profit, suffer a loss, or break even at each price. Price Quantity ollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? Shut down Shut down 10 20,000 Loss 20 10,000 Loss 32 5,000 Shut down Loss 40 Either 0 or 37,500 Produce Loss 50 40,000 Produce Loss 60 Either 0 or 42,500 Produce Loss COSTS (Dollars)

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: The Cost Of Production
Section: Chapter Questions
Problem 3PA
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Consider the perfectly competitive market for sports jackets. The following graph shows the marginal cost ( MCMC ), average total cost ( ATCATC ), and average variable cost ( AVCAVC ) curves for a typical firm in the industry.

100 90 80 70 60 ATC 50 40 30 20 AVC 10 MCO 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of jackets) For each price in the following table, use the graph to determine the number of jackets 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 jackets 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 (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 10 20,000 Shut down Loss Shut down 20 10,000 Loss 32 5,000 Shut down Loss 40 Either 0 or 37,500 v Produce Loss 50 40,000 Produce Loss 60 Either 0 or 42,500 V Produce Loss (siejjog) siso
Transcribed Image Text:100 90 80 70 60 ATC 50 40 30 20 AVC 10 MCO 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of jackets) For each price in the following table, use the graph to determine the number of jackets 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 jackets 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 (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 10 20,000 Shut down Loss Shut down 20 10,000 Loss 32 5,000 Shut down Loss 40 Either 0 or 37,500 v Produce Loss 50 40,000 Produce Loss 60 Either 0 or 42,500 V Produce Loss (siejjog) siso
100 90 Firm's Short-Run Supply 80 70 60 50 + 40 30 20 10 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of jackets) Suppose there are 5 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 Demand 70 60 Equilibrium 50 40 30 20 10 25 50 75 100 125 150 175 200 225 250 QUANTITY (Thousands of jackets) At the current short-run market price, firms will in the short run. In the long run, PRICE(Dollars per jacket) PRICE(Dollars per jacket)
Transcribed Image Text:100 90 Firm's Short-Run Supply 80 70 60 50 + 40 30 20 10 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of jackets) Suppose there are 5 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 Demand 70 60 Equilibrium 50 40 30 20 10 25 50 75 100 125 150 175 200 225 250 QUANTITY (Thousands of jackets) At the current short-run market price, firms will in the short run. In the long run, PRICE(Dollars per jacket) PRICE(Dollars per jacket)
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