For a burger seller Marginal, average variable and average total cost curves are attached below: 1. what is profit maximizing level of output and profit of this firm if the price of burger is $3.50?2. Below what price will this firm shut down in the short run?3. If the price was $4.50 ehat would be the firm's profit? The image displays a cost curve graph commonly used in microeconomics to illustrate the relationships between different types of costs as output increases.### Graph Explanation:- **Axes:** - The horizontal axis (x-axis) represents the quantity of output. - The vertical axis (y-axis) represents costs.- **Curves:** - **MC (Marginal Cost):** This curve is red and typically has a U-shape. It initially decreases, reaches a minimum point, and then rises. The MC curve intersects the ATC (Average Total Cost) and AVC (Average Variable Cost) curves at their respective lowest points. - **ATC (Average Total Cost):** This curve is green and also has a U-shape. It is higher than the AVC curve since total costs include both fixed and variable costs. The ATC curve also demonstrates economies of scale initially before rising. - **AVC (Average Variable Cost):** This purple curve lies below the ATC. Like the other curves, it starts high, decreases, and eventually rises due to diminishing returns.- **Intersection Points:** - The MC intersects the AVC and ATC at their minimum points, which is a typical characteristic of these curves.### Educational Insight:This graph is essential for understanding cost behaviors in production. The intersections of MC with AVC and ATC at their lowest points indicate optimal production levels where efficiency is maximized before the costs start to rise again. Understanding these curves helps businesses minimize costs and optimize output.

Answered: For a burger seller Marginal, average…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

For a burger seller Marginal, average variable and average total cost curves are attached below:

1. what is profit maximizing level of output and profit of this firm if the price of burger is $3.50?

2. Below what price will this firm shut down in the short run?

3. If the price was $4.50 ehat would be the firm's profit?

The image displays a cost curve graph commonly used in microeconomics to illustrate the relationships between different types of costs as output increases.

### Graph Explanation:

- **Axes:**
- The horizontal axis (x-axis) represents the quantity of output.
- The vertical axis (y-axis) represents costs.

- **Curves:**
- **MC (Marginal Cost):** This curve is red and typically has a U-shape. It initially decreases, reaches a minimum point, and then rises. The MC curve intersects the ATC (Average Total Cost) and AVC (Average Variable Cost) curves at their respective lowest points.
- **ATC (Average Total Cost):** This curve is green and also has a U-shape. It is higher than the AVC curve since total costs include both fixed and variable costs. The ATC curve also demonstrates economies of scale initially before rising.
- **AVC (Average Variable Cost):** This purple curve lies below the ATC. Like the other curves, it starts high, decreases, and eventually rises due to diminishing returns.

- **Intersection Points:**
- The MC intersects the AVC and ATC at their minimum points, which is a typical characteristic of these curves.

### Educational Insight:

This graph is essential for understanding cost behaviors in production. The intersections of MC with AVC and ATC at their lowest points indicate optimal production levels where efficiency is maximized before the costs start to rise again. Understanding these curves helps businesses minimize costs and optimize output.

Expert Solution

Step 1: Define profit maximizing quantity

In perfect competition,

There exists a large number of buyers and sellers.

The firm will produce where the price is equal to the marginal cost to maximize profit.

The profit is when the price is greater than the ATC, i.e., when the demand curve lies above the ATC.

The firm will produce in the short run when it is able to cover its variable cost.

In the long run, Each firm earns zero economic profit.

This means, In the long run, price = ATC.

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS