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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 Quantity Total Revenue (TR=PxQ) Fixed Cost (FC) Variable Cost (VC) Profit (TR-TC) (P) (9) 16 $162,000 12 162,000 18 162,000 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $162,000 per day. In other words, if it shuts down, the firm would suffer losses of $152,000 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 down-is per shirt.

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 Quantity Total Revenue (TR=PxQ) Fixed Cost (FC) Variable Cost (VC) Profit (TR-TC) (P) (9) 16 $162,000 12 162,000 18 162,000 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $162,000 per day. In other words, if it shuts down, the firm would suffer losses of $152,000 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 down-is per shirt.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
Problem 10PA
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4. Profit maximization in the cost-curve diagram A Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE Dollars per sht 20 HE 16 12 34 LE AD 72 OUTPUT (Theunts of shirts! Chow Ad In the short run, at a market price of $185 per shirt, this firm will choose to produce shirts per day. On the previous graph, use the blue rectangle (dirde symbols) to shade the area representing the firm's economic profit or loss if the market price is $18 and the firm chooses to produce the quantity you already selected. Tool tip: 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 Variable Cost Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) Profit (TR-TC) (P) (VC) 56 $162,000 162,000 162,000 18 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the fived cost of the firm producing shirts is $162,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 per day until its fixed costs and (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 down- per shirt. ATC AVC
Transcribed Image Text:4. Profit maximization in the cost-curve diagram A Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE Dollars per sht 20 HE 16 12 34 LE AD 72 OUTPUT (Theunts of shirts! Chow Ad In the short run, at a market price of $185 per shirt, this firm will choose to produce shirts per day. On the previous graph, use the blue rectangle (dirde symbols) to shade the area representing the firm's economic profit or loss if the market price is $18 and the firm chooses to produce the quantity you already selected. Tool tip: 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 Variable Cost Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) Profit (TR-TC) (P) (VC) 56 $162,000 162,000 162,000 18 If a firm shuts down, it incurs its fixed costs (FC) in the short run. In this case, the fived cost of the firm producing shirts is $162,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 per day until its fixed costs and (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 down- per shirt. ATC AVC
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