PECON 222 Standardized ArtifactThe Individual FirmMCQD = MRIn the adjacent graph, illustrate the following for a perfectlycompetitive firm.a) Set Q500 by identifying this profit maximizingquantity and labeling it as 500 on the graph.b) Set P = $24 by identifying this profit maximizing priceand labeling it as $24 on the graph.c) Draw and clearly label an average total cost curve suchthat there is negative profit.d) If the firm's maximum profit is a $250 loss, then whatis the value of average total cost (ATC) at Q* = 500?Sketch the ATC curve on the graph to show the lossand label the dollar value of the ATC at Q* = 500.e) The firm will base its shut-down decision on averagevariable cost (AVC). Sketch an AVC curve to show acondition in which the firm will not shut down in theshort run.f) What is the possible range of values that AVC couldtake on at Q* = 500?g) Assume that at Q* we have an AVC = $10. Whatwould the firm's profit be if it did decide to shut downin the short run?

a. Set Q* at 500On your graph, the equilibrium quantity is the intersection of D = MR and MC b. Set…

Answered: P ECON 222 Standardized Artifact The…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.8P

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