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 oven) (Ovens) (Dollars) (Dollars) (Dollars) (Dollars) 25.00 1,600,000 70.00 1,600,000 $25.00 100.00 1,600,000 $35.00 If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed $70.00 500,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as t on of a building lease). $100.00 This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is v per oven.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose that the market for microwave ovens is a competitive market. The following graph shows the daily cost curves of a firm operating in this
market.
100
90
80
ATC
70
60
50
40
30
AVC
20
10
MC
5
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of ovens)
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 oven)
(Ovens)
(Dollars)
(Dollars)
(Dollars)
(Dollars)
25.00
1,600,000
70.00
1,600,000
$25.00
100.00
1,600,000
$35.00
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed $70.00 500,000 per day. In other words, if
it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as t
on of a building lease).
$100.00
This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is
v per oven.
PRICE (Dollars per oven)
Transcribed Image Text:Suppose that the market for microwave ovens is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. 100 90 80 ATC 70 60 50 40 30 AVC 20 10 MC 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of ovens) 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 oven) (Ovens) (Dollars) (Dollars) (Dollars) (Dollars) 25.00 1,600,000 70.00 1,600,000 $25.00 100.00 1,600,000 $35.00 If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed $70.00 500,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 per day until its fixed costs end (such as t on of a building lease). $100.00 This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is v per oven. PRICE (Dollars per oven)
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