Tulip growing is a perfectly competitive industry and all growers have the same costs. The market price of tulips is $30 a bunch and each grower maximizes profit by producing 1,600 bunches a week. Average total cost of producing tulips is $25 a bunch and average variable cost is $18 a bunch. Minimum average variable cost is $10 a bunch. Calculate each grower's economic profit or loss in the short run.

Tulip growing is a perfectly competitive industry and all growers have the same costs. The market price of tulips is $30 a bunch and each grower maximizes profit by producing 1,600 bunches a week. Average total cost of producing tulips is $25 a bunch and average variable cost is $18 a bunch. Minimum average variable cost is $10 a bunch. Calculate each grower's economic profit or loss in the short run.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter9: Market Structure And Long-run Equilibrium

Section: Chapter Questions

Problem 7MC

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Tulip growing is a perfectly competitive industry, and all tulip growers have the same cost curves. The market price of tulips is €25 a bunch, and each grower maximizes profit by producing 2,000 bunches a week. The average total cost of producing tulips is €20 a bunch, and the average variable cost is €15 a bunch. Minimum average variable cost is €12 a bunch. What is the economic profit (loss) that each grower is making in the short run?
Tulip growing is perfectly competitive and all growers have the same costs. The market price is $25 a bunch, and each grower maximizes profit by producing 2,000 bunches a week. The average total cost is $20 a bunch, and the average variable cost is $15 a bunch. The minimum average variable cost is $12 a bunch. Please draw graphs where necessary. What is the economic profit that each grower is making in the short run? What is the price at the grower’s shutdown point? What is each grower’s economic profit at the shutdown point?
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