In the short run, at a market price of $50 per oven, this firm will choose to produce ovens per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $50 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's would be $ thousand per day in the short run.
In the short run, at a market price of $50 per oven, this firm will choose to produce ovens per day. On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $50 and the firm chooses to produce the quantity you already selected. Note: In the following question, enter a positive number, even if it represents a loss. The area of this rectangle indicates that the firm's would be $ thousand per day in the short run.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
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.
Hint: After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point.
Transcribed Image Text:### Understanding Cost Curves in a Competitive Market for Microwave Ovens
#### Cost Curves Analysis
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.
#### Key Points
- **ATC (Average Total Cost)**: This curve shows the average total cost per unit at different levels of production.
- **MC (Marginal Cost)**: This curve illustrates the cost of producing one additional unit of output.
- **AVC (Average Variable Cost)**: This curve represents the average variable cost per unit at different levels of production.
#### Graph Explained
The graphical representation provided charts the relationship between the quantity of microwave ovens produced (in thousands per day) and the price (in dollars per oven).
- **X-Axis**: Indicates the quantity of microwave ovens produced per day, ranging from 0 to 50 thousand units.
- **Y-Axis**: Shows the price in dollars per oven, ranging from $0 to $100.
Each curve is color-coded for clarity:
- **MC (Marginal Cost)** is represented by the orange curve.
- **ATC (Average Total Cost)** is drawn as the green curve.
- **AVC (Average Variable Cost)** is depicted by the purple curve.
#### Hint
After placing the rectangle on the graph, you can select an endpoint to see the coordinates of that point. This feature can help highlight specific cost and quantity combinations, aiding in better understanding of the cost structures.
Understanding these curves is crucial for making informed production decisions in a competitive marketplace.
![### Short-Run Production Decisions
**Production Quantity Decision**
In the short run, at a market price of $50 per oven, this firm will choose to produce [Select Quantity] ovens per day.
**Graphical Analysis of Profit or Loss**
On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm’s profit or loss if the market price is $50 and the firm chooses to produce the quantity you already selected.
**Instructions for Further Calculation**
- **Note:** In the following question, enter a positive number, even if it represents a loss.
The area of this rectangle indicates that the firm’s [Select Profit or Loss] would be $ [Enter Amount] thousand per day in the short run.
### Explanation of Graphs and Diagrams
In the graph indicated, the blue rectangle represents the financial performance of the firm at a given market price and production level. If you need to determine the firm's profit or loss:
1. **Identify the Quantity Produced:** Select the quantity of ovens the firm chooses to produce when the market price is $50.
2. **Shade the Relevant Area:** Use the blue rectangle to shade the area that shows either the profit or loss. This visualization helps in understanding the relationship between the fixed market price, production cost, and revenue.
3. **Calculate the Rectangle's Area:** This calculation will provide the financial outcome (profit or loss), which should be entered as a positive number.
This process helps understand short-run production decisions and their financial outcomes in a competitive market.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fddb360c7-73d9-4055-9725-e34ea68e24ad%2Fbb6af744-9469-469b-bf7d-b602825c89a5%2Flvu0h2_processed.png&w=3840&q=75)
Transcribed Image Text:### Short-Run Production Decisions
**Production Quantity Decision**
In the short run, at a market price of $50 per oven, this firm will choose to produce [Select Quantity] ovens per day.
**Graphical Analysis of Profit or Loss**
On the preceding graph, use the blue rectangle (circle symbols) to shade the area representing the firm’s profit or loss if the market price is $50 and the firm chooses to produce the quantity you already selected.
**Instructions for Further Calculation**
- **Note:** In the following question, enter a positive number, even if it represents a loss.
The area of this rectangle indicates that the firm’s [Select Profit or Loss] would be $ [Enter Amount] thousand per day in the short run.
### Explanation of Graphs and Diagrams
In the graph indicated, the blue rectangle represents the financial performance of the firm at a given market price and production level. If you need to determine the firm's profit or loss:
1. **Identify the Quantity Produced:** Select the quantity of ovens the firm chooses to produce when the market price is $50.
2. **Shade the Relevant Area:** Use the blue rectangle to shade the area that shows either the profit or loss. This visualization helps in understanding the relationship between the fixed market price, production cost, and revenue.
3. **Calculate the Rectangle's Area:** This calculation will provide the financial outcome (profit or loss), which should be entered as a positive number.
This process helps understand short-run production decisions and their financial outcomes in a competitive market.
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