Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variablecost (AVC) curves for a typical firm in the industry.COSTS (Dollars)1009080706030201000☐3MC615, 20ATCAVC09 12 15 18 21QUANTITY (Thousands of shirts)2427130(?) For each price in the following table, use the graph to determine the number of shirts 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 shirts 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.Price(Dollars per shirt)102030506090Quantity(Shirts)Produce or Shut Down?Profit or Loss?

In a perfectly competitive market there are large number of firms producing similar and identical…

Answered: COSTS (Dollars) 100 90 80 70 30 20 10 0…

COSTS (Dollars) 100 90 80 70 30 20 10 0 U MC 15, 20 ATC AVC ☐ 0 03 6 9 12 15 18 21 24 QUANTITY (Thousands of shirts) 27 30 (?)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1.4CE

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Question

Consider the competitive market for dress shirts. 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.
COSTS (Dollars)
100
90
80
70
60
30
20
10
0
0
☐
3
MC
6
15, 20
ATC
AVC
0
9 12 15 18 21
QUANTITY (Thousands of shirts)
24
27
1
30
(?)

For each price in the following table, use the graph to determine the number of shirts 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 shirts 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
(Dollars per shirt)
10
20
30
50
60
90
Quantity
(Shirts)
Produce or Shut Down?
Profit or Loss?

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