Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variablecost (AVC) curves for a typical firm in the industry.100907060ATC403020AVC10 +++++10 15 20 3 30 35 o 5QUANTITY (Thousands of jackets)50For each price in the following table, use the graph to determine the number ofr jackets this firm would produce in order to maximize its profit. Assumethat when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizingquantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it willmake a profit, suffer a loss, or break even at each price.PriceQuantity(Dollars per jacket)(Jackets)Produce or Shut Down?Profit or Loss?102032COSTS (Dollars) On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that correspondsto prices where there is positive output. (Note: You are given more points to plot than you need.)10090Firm's Short-Run SupplyB070605040302010+1015253035404550QUANTITY (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 thatcorresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plussymbol) 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.10090Industry's Short-Run Supply80Demand70Equilibrium605040302010255075100125150175 200225250QUANTITY (Thousands of jackets)At the current short-run market price, firms willin the short run. In the long run,PRICE (Dollars per jacket)PRICE (Dolars per jacket)

The graph and the numbers will look like this and can be helpful in completing the table:

Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 70 60 ATC 40 30 20 AVC 10 + ++++ 10 15 20 3 30 35 o 5 QUANTITY (Thousands of jackets) 50 For each price in the following table, use the graph to determine the number ofr 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 32 COSTS (Dollars)

Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 70 60 ATC 40 30 20 AVC 10 + ++++ 10 15 20 3 30 35 o 5 QUANTITY (Thousands of jackets) 50 For each price in the following table, use the graph to determine the number ofr 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 32 COSTS (Dollars)

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 4PA

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Similar questions

A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
Firms ill a perfectly competitive market are said to be price takers that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?
Based on your answers to the WipeOut Ski Company in Exercise 7.3, now imagine a situation where the firm produces a quantity of 5 units that it sells for a price of 25 each. What will be the companys profits or losses? How can you tell at a glance whether the company is making or losing money at this price by looking at average cost? At the given quantity and price, is the marginal unit produced adding to profits?
What two lines on a cost curve diagram intersect at the zero-profit point?
What two lines on a cost curve diagram intersect at the shutdown point?
A firms marginal cost curve above the average variable cost curve is equal to the films individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the films individual supply curve if marginal costs increase?