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Consider the perfectly competitive market for dress shirts. 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. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 50 40 20 10 0 MCO ATC AVC 0 10 20 30 40 50 60 70 80 90 100 QUANTITY OF OUTPUT (Thousands of shirts) C For each price in the following table, use the graph to determine the number of shirts 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 shirts and the profit- maximizing quantity. Also, indicate whether the firm will produce shut down or ho indiffe

Consider the perfectly competitive market for dress shirts. 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. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 50 40 20 10 0 MCO ATC AVC 0 10 20 30 40 50 60 70 80 90 100 QUANTITY OF OUTPUT (Thousands of shirts) C For each price in the following table, use the graph to determine the number of shirts 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 shirts and the profit- maximizing quantity. Also, indicate whether the firm will produce shut down or ho indiffe

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the perfectly competitive market for dress shirts. 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. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 50 30 10 0 0 MC Price (Dollars per shirt) 15 O 20 25 55 70 85 ATC 0 10 20 30 40 50 60 70 QUANTITY OF OUTPUT (Thousands of shirts). AVC For each price in the following table, use the graph to determine the number of shirts 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 shirts 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. 80 90 100 Quantity (Shirts) ? Produce or Shut Down? Profit or Loss? 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.) (?)
Transcribed Image Text:Consider the perfectly competitive market for dress shirts. 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. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 50 30 10 0 0 MC Price (Dollars per shirt) 15 O 20 25 55 70 85 ATC 0 10 20 30 40 50 60 70 QUANTITY OF OUTPUT (Thousands of shirts). AVC For each price in the following table, use the graph to determine the number of shirts 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 shirts 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. 80 90 100 Quantity (Shirts) ? Produce or Shut Down? Profit or Loss? 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.) (?)
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.) PRICE (Dollars per shirt) 85 100 90 PRICE (Dollars per shirt) 80 70 60 50 40 30 20 10 0 0 10 30 40 50 60 70 QUANTITY OF OUTPUT (Thousands of shirts) 88 2288 22 Suppose there are 8 firms in this industry, each of which has the cost curves previously shown. 100 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. 90 80 Demand 70 60 50 20 20 10 0 80 90 100 0 80 160 240 320 400 480 560 QUANTITY OF OUTPUT (Thousands of shirts) -0- 640 720 800 Firm's Short-Run Supply At the current short-run market price, firms will -0- Industry's Short-Run Supply + Equilibrium (?) in the short run. In the long run,
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.) PRICE (Dollars per shirt) 85 100 90 PRICE (Dollars per shirt) 80 70 60 50 40 30 20 10 0 0 10 30 40 50 60 70 QUANTITY OF OUTPUT (Thousands of shirts) 88 2288 22 Suppose there are 8 firms in this industry, each of which has the cost curves previously shown. 100 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. 90 80 Demand 70 60 50 20 20 10 0 80 90 100 0 80 160 240 320 400 480 560 QUANTITY OF OUTPUT (Thousands of shirts) -0- 640 720 800 Firm's Short-Run Supply At the current short-run market price, firms will -0- Industry's Short-Run Supply + Equilibrium (?) in the short run. In the long run,
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