1. Profit maximization of a seller in a competitive price-searcher market Consider De Virtuose Cupcake, a cupcake shop in a competitive price-searcher market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the shop is operating in the short run. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. If the shop is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. If the shop is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE (Dollars per cupcake) 4.00 3.50 3.00 2.50 2.00 ATC 1.50 1.00 0.50 MC 0 0 0.5 1.0 Demand MR 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cupcakes) At the profit-maximizing output and price, the shop's profit is equal to $ Given the profit-maximizing choice of output and price, there are equilibrium. Monopoly Outcome Profit Loss (?) (Hint: Be sure to enter a minus sign if profit is negative.) shops in the industry than there would be in long-run

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Chapter1: Making Economics Decisions
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1. Profit maximization of a seller in a competitive price-searcher market
Consider De Virtuose Cupcake, a cupcake shop in a competitive price-searcher market. The following graph shows its demand curve (Demand),
marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the shop is operating in the short run.
Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. If the shop is making a profit, use the green
rectangle (triangle symbols) to shade in the area representing its profit. If the shop is suffering a loss, use the purple rectangle (diamond symbols) to
shade in the area representing its loss.
PRICE (Dollars per cupcake)
4.00
3.50
3.00
2.50
2.00
ATC
1.50
1.00
0.50
MC
0
0
0.5
1.0
Demand
MR
1.5
2.0
2.5
3.0
3.5
4.0
QUANTITY (Thousands of cupcakes)
At the profit-maximizing output and price, the shop's profit is equal to $
Given the profit-maximizing choice of output and price, there are
equilibrium.
Monopoly Outcome
Profit
Loss
(?)
(Hint: Be sure to enter a minus sign if profit is negative.)
shops in the industry than there would be in long-run
Transcribed Image Text:1. Profit maximization of a seller in a competitive price-searcher market Consider De Virtuose Cupcake, a cupcake shop in a competitive price-searcher market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the shop is operating in the short run. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. If the shop is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. If the shop is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE (Dollars per cupcake) 4.00 3.50 3.00 2.50 2.00 ATC 1.50 1.00 0.50 MC 0 0 0.5 1.0 Demand MR 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cupcakes) At the profit-maximizing output and price, the shop's profit is equal to $ Given the profit-maximizing choice of output and price, there are equilibrium. Monopoly Outcome Profit Loss (?) (Hint: Be sure to enter a minus sign if profit is negative.) shops in the industry than there would be in long-run
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