Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 70 60 ATC 40 30 20 AVC 10 + ++++ 10 15 20 3 30 35 o 5 QUANTITY (Thousands of jackets) 50 For each price in the following table, use the graph to determine the number ofr jackets this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 10 20 32 COSTS (Dollars)

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Chapter1: Making Economics Decisions
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Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable
cost (AVC) curves for a typical firm in the industry.
100
90
70
60
ATC
40
30
20
AVC
10 +
++++
10 15 20 3 30 35 o 5
QUANTITY (Thousands of jackets)
50
For each price in the following table, use the graph to determine the number ofr jackets this firm would produce in order to maximize its profit. Assume
that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing
quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will
make a profit, suffer a loss, or break even at each price.
Price
Quantity
(Dollars per jacket)
(Jackets)
Produce or Shut Down?
Profit or Loss?
10
20
32
COSTS (Dollars)
Transcribed Image Text:Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. 100 90 70 60 ATC 40 30 20 AVC 10 + ++++ 10 15 20 3 30 35 o 5 QUANTITY (Thousands of jackets) 50 For each price in the following table, use the graph to determine the number ofr jackets this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 10 20 32 COSTS (Dollars)
On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds
to prices where there is positive output. (Note: You are given more points to plot than you need.)
100
90
Firm's Short-Run Supply
B0
70
60
50
40
30
20
10
+
10
15
25
30
35
40
45
50
QUANTITY (Thousands of jackets)
Suppose there are 5 firms in this industry, each of which has the cost curves previously shown.
On the following graph, use the orange points (square symbol) to plot points along the portion of the industry's short-run supply curve that
corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plus
symbol) on the graph to indicate the short-run equilibrium price and quantity in this market.
Note: Dashed drop lines will automatically extend to both axes.
100
90
Industry's Short-Run Supply
80
Demand
70
Equilibrium
60
50
40
30
20
10
25
50
75
100
125
150
175 200
225
250
QUANTITY (Thousands of jackets)
At the current short-run market price, firms will
in the short run. In the long run,
PRICE (Dollars per jacket)
PRICE (Dolars per jacket)
Transcribed Image Text:On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) 100 90 Firm's Short-Run Supply B0 70 60 50 40 30 20 10 + 10 15 25 30 35 40 45 50 QUANTITY (Thousands of jackets) Suppose there are 5 firms in this industry, each of which has the cost curves previously shown. On the following graph, use the orange points (square symbol) to plot points along the portion of the industry's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. Note: Dashed drop lines will automatically extend to both axes. 100 90 Industry's Short-Run Supply 80 Demand 70 Equilibrium 60 50 40 30 20 10 25 50 75 100 125 150 175 200 225 250 QUANTITY (Thousands of jackets) At the current short-run market price, firms will in the short run. In the long run, PRICE (Dollars per jacket) PRICE (Dolars per jacket)
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