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Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.

Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.

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 7PA
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4. Profit maximization in the cost-curve diagram

Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.
Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point.
4. Profit maximization in the cost-curve diagram Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. 40 36 Profit or Loss 32 28 24 20 ATC 16 12 AVC 8 MC 4 4 6 8 10 12 14 16 18 20 QUANTITY (Thousands of candles per day) In the short run, at a market price of $20 per candle, this firm will choose to produce 8,000 candles per day. PRICE (Dollars per candle)
Transcribed Image Text:4. Profit maximization in the cost-curve diagram Suppose that the market for candles is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. 40 36 Profit or Loss 32 28 24 20 ATC 16 12 AVC 8 MC 4 4 6 8 10 12 14 16 18 20 QUANTITY (Thousands of candles per day) In the short run, at a market price of $20 per candle, this firm will choose to produce 8,000 candles per day. PRICE (Dollars per candle)
QUANTIT IousanTUS or candiEs per day) In the short run, at a market price of $20 per candle, this firm will choose to produce 8,000 candles per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $20 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's profit would be $32 thousand per day in the short run. Grade It Now Save & Continue
Transcribed Image Text:QUANTIT IousanTUS or candiEs per day) In the short run, at a market price of $20 per candle, this firm will choose to produce 8,000 candles per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $20 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's profit would be $32 thousand per day in the short run. Grade It Now Save & Continue
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