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)

Question

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.

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)
Expand
Transcribed Image Text

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)

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