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Jl all S 6.55K/s 4 65% =) 7:50 PM @ @ content://org.tele + (1] CLICK HERE TO GET MORE FREE SOLUTIONS On x and y axes, draw ATC, AVC and MC curves and four alternative demand curves that the Perfectly Competitive Firm might face.A 1. a) Draw D1 such that the firm makes a profit. A 2. b) Draw D2 such that the firm breaks even (profit=0).A . 3. ¢) Draw D3 such that the firm is at its shut down point A 4. d) Draw D4 such that the firm would shut down rather than produce. 4. On x and y axes, draw ATC, AVC and MC curves and four alternative demand curves that the Perfectly Competitive Firm might face. a) Draw D1 such that the firm makes a profit. b) Draw D2 such that the firm breaks even (profit=0). ¢) Draw D3 such that the firm is at its shut down point. d) Draw D4 such that the firm would shut down rather than produce. l».expand button Transcribed Image Text:4. On x and y axes, draw ATC, AVC and MC curves and four alternative demand curves that the Perfectly Competitive Firm might face. a) Draw D1 such that the firm makes a profit. b) Draw D2 such that the firm breaks even (profit=0). c) Draw D3 such that the firm is at its shut down point. d) Draw D4 such that the firm would shut down rather than produce. :: Solution :: arrow_forward Step 1 Perfect competition is a structure of a market in which there are many sellers and buyers. The commodities sold in this market are similar or homogeneous. In this market, the firm takes the price of the products as given which is determined by the industry demand and supply. arrow_forward Step 2 MC Price Q3Q20Q! Quantity E. In perfect competition, the firm produces at a point where MR-MC. When the price charged by the firm is more than the verage total cost, the firm earns a profit. It is shown by the point 'a’ in the above diagram. Here, at quantity Q1, the price is P1 which is above ATC at that quantity. b. Break-even point of a firm is the point where the production cost of the commodity just equalizes the TR (total revenue) earned from it. It is the point where the firm earns zero profit. In the diagram, at the quantity Q2, the firm is at break-even because the price P2 charged is equal to ATC. c. In the short run, a profitmaximizing firm will continue producing a positive amount of output even at a loss if it is able to cover its AVC (average variable cost). In the above diagram, point 'c' shows the shutdown point where the firm just covers the AVC of production. d. The firm shut down its production when the price or average revenue is less than It is shown by point 'd' where the firm doesn't produce anything, ikes: 0 islikes: 0