Consider the perfectly 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 30 20 10 0 0 10 O Price (Dollars per jacket) 15 MCD 20 25 55 70 85 10 For each price in the following table, use the graph to determine the number of 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. ATC AVC 10 20 30 40 50 60 70 80 90 100 QUANTITY OF OUTPUT (Thousands of jackets) O Quantity (Jackets) Y 10 20 30 40 100 100 100 QUANTITY OF OUTPUT (Thousands of jack) On the following graph, use the orange points (square symbol) toplot 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.) Produce or Shut Down? Suppose there are 8 firms in this industry, each of which has the cost curves previously shown. At the current short-run market price, firms will 160 340 300 400 480 540 640 72000 QUANTITY OF OUTPUT (Thousands of jack) -0 Fem's Shot-Run Supply 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 aves H. ▼ Industry's Short Run Supply ▾ in the short run. In the long run Profit or Loss?
Consider the perfectly 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 30 20 10 0 0 10 O Price (Dollars per jacket) 15 MCD 20 25 55 70 85 10 For each price in the following table, use the graph to determine the number of 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. ATC AVC 10 20 30 40 50 60 70 80 90 100 QUANTITY OF OUTPUT (Thousands of jackets) O Quantity (Jackets) Y 10 20 30 40 100 100 100 QUANTITY OF OUTPUT (Thousands of jack) On the following graph, use the orange points (square symbol) toplot 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.) Produce or Shut Down? Suppose there are 8 firms in this industry, each of which has the cost curves previously shown. At the current short-run market price, firms will 160 340 300 400 480 540 640 72000 QUANTITY OF OUTPUT (Thousands of jack) -0 Fem's Shot-Run Supply 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 aves H. ▼ Industry's Short Run Supply ▾ in the short run. In the long run Profit or Loss?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider the perfectly 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.
PRICE AND COST PER UNIT
100
90
10
0
10
Price
(Dollars per jacket)
15
20
25
55
70
85
20
10
100
0
00
For each price in the following table, use the graph to determine the number of 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.
20
10
D
MC-D
0
·
D
0
ATC O
AVC
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.)
?
10 20 30 40 50 60 70 80
QUANTITY OF OUTPUT (Thousands of jackets)
d
Demand
O
Quantity
(Jackets)
Suppose there are 8 firms in this industry, each of which has the cost curves previously shown
10 20 30 40 50 60 70 80 90 100
QUANTITY OF OUTPUT (Thousands of jackets)
10 100
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.
At the current short-run market price, firms will
NO 100 340 300 400 480 560 640 72000
40
QUANTITY OF OUTPUT (Thousands of jackets)
Produce or Shut Down?
-0
Fem's Short-Run Supply
-0
|4
?
Industry's Short Run Supply
+
Equrum
▼
in the short run. In the long run,
Profit or Loss?
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