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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 grach 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 (P) 16 12 18 Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) Profit (TR-TC) If a firm shuts down, it incurs its fleed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $167,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 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- 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 grach 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 (P) 16 12 18 Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) Profit (TR-TC) If a firm shuts down, it incurs its fleed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $167,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 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- per shirt.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 8PA
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4. Profit maximization in the cost-curve diagram All- Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE Dlars per sht 20 16 12 12 Price (P) 56 34 AD 12 LE OUTPUT(Theunts of art! In the short run, at a market price of 31 per shirt, this firm will choose to produce 12 18 ME ATC AVC Quantity (Q) Pr On the previous graph, use the blue rectangle (dinde 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 Chow Al 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.) Total Revenue (TR = PxQ) shirts per day. Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) per day. Profit (TR-TC) 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 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.
Transcribed Image Text:4. Profit maximization in the cost-curve diagram All- Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE Dlars per sht 20 16 12 12 Price (P) 56 34 AD 12 LE OUTPUT(Theunts of art! In the short run, at a market price of 31 per shirt, this firm will choose to produce 12 18 ME ATC AVC Quantity (Q) Pr On the previous graph, use the blue rectangle (dinde 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 Chow Al 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.) Total Revenue (TR = PxQ) shirts per day. Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) per day. Profit (TR-TC) 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 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.
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