In Exhibit 1 above, explain why the curve between A and B looks different than the curve from A to C. Provide an example of how a firm could opt to follow the A to C curve instead of the A to B curve. Section 11.5The Short-Run and Long-Run Average Total Cost Curvesexhibit 1SRATC forsmall plantSRATC formedium plantSRATC forlarge plantLRATCB$500Diseconomies$400of ScaleEconomiesof ScaleConstant Returnsto Scale1,000 1,200Quantity of Computers(per day)Notice that the long-run average total cost (LRATC) curve is much flatter than the short-run average total cost (SRATC) curve. This is because firmscan be more flexible in the long run-they can choose which short-run cost curve they want to operate along, by choosing their plant scale. But theycannot do this in the short run, during which they are stuck with their existing short-run cost curve. That is, in the short run, the fim operates with theshort-run curve it has based on past decisions. However, in the long run, the firm is able to choose the short-run curve it wants to use.Average Cost

The LRATC curve is flatter than the SRATC curve because firms are more flexible in the long run and…

Answered: bove, explain why the curve between A…

bove, explain why the curve between A and B looks different than the curve from A to C. Provide an example of how a firm could opt to follow the A to C cu

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Create a firm model (TWO graphs, one for total units and one for marginal units)
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The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for jumpsuits. COSTS (Dollars) 80 72 64 56 24 16 8 0 0 8 0 MC ATC AVC Price (Dollars per jumpsuit) 4 8 12 36 48 60 ■ 16 24 32 40 48 56 QUANTITY (Thousands of jumpsuits) ☐ Quantity (Jumpsuits) 64 For every price level given in the following table, use the graph to determine the profit-maximizing quantity of jumpsuits for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero jumpsuits and the profit-maximizing quantity of jumpsuits.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. 72 80 Produce or Shut Down? Profit or Loss?
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