Assume that Jasmine is a typical firm that produces and sells T-shirts in a perfectly competitive constant-cost industry. The market is currently in long-run equilibrium. The market price is $5, and Jasmine'smarginal cost at each level of output is listed in the table below.Quantity of Output0123456Marginal Cost0234567(a) What is Jasmine's pront-imamizing quantity of output? Explain.(b) Draw a correctly labeled graph for Jasmine, and show Jasmine's total revenue at the profit-maximizingquantity, shaded completely.(c) Now assume consumer demand for T-shirts increases. What will happen to the number of firms in themarket in the long run? Explain.

Marginal Cost refers the sum of money that a producer incurs in producing an additional unit of the good from the total production of the goods. It is used to determine the perfectly competitive price that a firm will charge. Given,Market price, In a perfectly competitive market, firms charge price equal to their marginal costs of production. So, the marginal cost is equal to $5 at the production level of 4 units. The profit-maximizing level of output is 4 units.The supply curve is drawn using the marginal cost schedule as the supplier provides the goods only at its marginal costs in the competitive market. The market demand curve is equal to . It is because the market is perfectly competitive..The following graph shows the market:Figure 1.The graph above shows the demand curve and the supply curve. The total revenue is represented by the area of ABCE.When the demand for t-shirts increases, the market for t-shirts becomes attractive for new firms. So, new firms enter the market as they can earn profits by producing t-shirts. So, the number of firms in the t-shirt industry will increase in the long run. In the short-run, the number of firms remain unchanged as only the production by the existing firms will increase.So, due to the increase in demand, the number of firms in the long run will increase.(a) The profit-maximizing level of quantity is 4 units.(b) The total revenue is represented by the area of ABCE in Figure 1.(c) The number of firms in the long run will increase.

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Economics

Assume that Jasmine is a typical firm that produces and sells T-shirts in a perfectly competitive constant- cost industry. The market is currently in long-run equilibrium. The market price is $5, and Jasmine's marginal cost at each level of output is listed in the table below. Quantity of Output 0 1 2 3 4 5 6 Marginal Cost 0 2 3 4 5 6 7 (a) What is Jasmine's profternavmizing quantity of output? Explain. (b) Draw a correctly labeled graph for Jasmine, and show Jasmine's total revenue at the profit-maximizing quantity, shaded completely.

Assume that Jasmine is a typical firm that produces and sells T-shirts in a perfectly competitive constant- cost industry. The market is currently in long-run equilibrium. The market price is $5, and Jasmine's marginal cost at each level of output is listed in the table below. Quantity of Output 0 1 2 3 4 5 6 Marginal Cost 0 2 3 4 5 6 7 (a) What is Jasmine's profternavmizing quantity of output? Explain. (b) Draw a correctly labeled graph for Jasmine, and show Jasmine's total revenue at the profit-maximizing quantity, shaded completely.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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