6 The marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm are shown in the figure below. Themarket price is $10.Instructions: Use the tool provided (Pt. A) to identify the profit-maximizing output. Then use the tool "Profit" to draw the area of profit(or loss) that occurs at this level of output. Position this rectangle by dragging on the vertices.Price/Cost ($)50403020100102030QuantityMC40ATCAVC50Tools-iPt. AProfit0

A profit-maximizing firm produces at the intersection point of MR and MC in order to maximize profit…

The marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm are shown in the figure below. The market price is $10. Instructions: Ise the tool provided (Pt. Al to identify the profi imizing output. Then use the tool "Profit" to draw the area of prof

The marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm are shown in the figure below. The market price is $10. Instructions: Ise the tool provided (Pt. Al to identify the profi imizing output. Then use the tool "Profit" to draw the area of prof

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter23: Profit Maximization

Section: Chapter Questions

Problem 3E

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Royersford Knitting Mills, Ltd. sells a line of women’s knit underwear. The firm now sells about 20,000 pairs a year at an average price of $10 each. Fixed costs $60,000, and total variable costs equal $120,000. The production department has estimated that a 10 percent increase in output would not affect fixed costs but would reduce average variable cost by 40 cents. The marketing department advocates a price reduction of 5 percent to increase sales, total revenues, and profits. The arc elasticity of demand is estimated at -2. Evaluate the impact of the proposal to cut prices on (1) total revenue, (2) total cost, and (3) total profits. If average variable costs are assumed to remain constant over a 10 percent increase in output, evaluate the effects of the proposed price cut on total profits.
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Royersford Knitting Mills, Ltd., sells a line of women’s knit underwear. The firm now sells about 20,000 pairs a year at an average price of $20 each. Fixed costs amount to $120,000, and total variable costs equal $240,000. The production department has estimated that a 10 percent increase in output would not affect fixed costs but would reduce average variable cost by 40 cents. The marketing department advocates a price reduction of 5 percent to increase sales, total revenues, and profits. The arc elasticity of demand with respect to prices is estimated at −2. The proposal to cut prices by 5 percent would total revenues from $400,000 to . Total costs would be and total profits would be . If average variable costs are assumed to remain constant over a 10 percent increase in output, total profits after a 5 percent price cut would be .
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The covid 19 pandemic has had a significant impact on the clothing industry. With more people working from home, the demand for business attire dramatically decreased. In the short run, a struggling business attire retailer should temporarily shut down if at the profit-maximizing or loss minimizing point the marginal revenue curve is
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Royersford Knitting Mills, Ltd., sells a line of women’s knit underwear. The firm now sells about 20,000 pairs a year at an average price of £40 each. Fixed costs amount to £240,000, and total variable costs equal £480,000. The production department has estimated that a 10 percent increase in output would not affect fixed costs but would reduce average variable cost by 40 cents. The marketing department advocates a price reduction of 5 percent to increase sales, total revenues, and profits. The arc elasticity of demand with respect to prices is estimated at −2. (mark as many as apply) The proposal to cut prices by 5 percent would increase total revenues from £800,000 to 836,000 – correct Total costs would be £759,200 and total profits would be £76,800– correct The proposal to cut prices by 5 percent would decrease total revenues from £800,000 to 836,000 – incorrect Total costs would be £759,200 and total revenues would be £76,800 – incorrect Could anyone explain this??
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