For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.)\[\begin{array}{|c|c|c|c|c|c|}\hline\text{Price } (\text{Dollars per wind chime}) & \text{Quantity } (\text{Wind chimes}) & \text{Total Revenue } (\text{Dollars}) & \text{Fixed Cost } (\text{Dollars}) & \text{Variable Cost } (\text{Dollars}) & \text{Profit } (\text{Dollars}) \\\hline10.00 & & & 44,000 & & \\\hline16.00 & & & 44,000 & & \\\hline40.00 & & & 44,000 & & \\\hline\end{array}\]If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $44,000 per day. In other words, if it shuts down, the firm would suffer losses of $44,000 per day until its fixed costs end (such as the expiration of a building lease).This firm's **shutdown price**—that is, the price below which it is optimal for the firm to shut down—is _______ per wind chime. **5. Profit maximization and shutting down in the short run**Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.**Graph Explanation:**The graph presents various cost curves related to the production of wind chimes, typically found in economic analysis:- **Axes:** - Horizontal axis: Quantity of wind chimes produced (in thousands). - Vertical axis: Price (in dollars per wind chime).- **Curves:** - **MC (Marginal Cost):** The green curve represents the marginal cost, which initially decreases, reaches a minimum point, and then increases as production quantity rises. - **AVC (Average Variable Cost):** The orange curve shows the average variable cost, starting higher, decreasing to a minimum point, and then increasing. - **ATC (Average Total Cost):** The purple curve indicates average total cost, which mirrors the AVC curve but remains above it due to the inclusion of average fixed costs. The ATC is typically U-shaped, reflecting economies and diseconomies of scale.- **Highlights:** - Points marked along the curves likely indicate significant intersections or minimum points relevant to cost analysis and decision-making in a competitive market scenario. This graph is important for understanding how costs behave as output changes and aids in identifying optimal production levels to maximize profit or minimize losses.

A perfectly-competitive firm produces homogenous-product. These goods(G) are substitutable. A…

For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.) Price Quantity Total Revenue Fixed Cost Variable Cost Profit (Dollars per wind chime) (Wind chimes) (Dollars) (Dollars) (Dollars) (Dollars) 10.00 44,000 16.00 44,000 40.00 44,000 If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $44,000 per day. In other words, if it shuts down, the firm would suffer losses of $44,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per wind chime.

For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.) Price Quantity Total Revenue Fixed Cost Variable Cost Profit (Dollars per wind chime) (Wind chimes) (Dollars) (Dollars) (Dollars) (Dollars) 10.00 44,000 16.00 44,000 40.00 44,000 If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $44,000 per day. In other words, if it shuts down, the firm would suffer losses of $44,000 per day until its fixed costs end (such as the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per wind chime.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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