Then, plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and averagevariable cost (AVC) curves for a typical firm in the industry.(?10090807060ATC50403020AVC10МС+++101520253035404550QUANTITY OF OUTPUT (Thousands of shirts)PRICE AND COST PER UNIT (Dollars) For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assumethat when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the loss-minimizingquantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it willmake a profit, suffer a loss, or break even at each price.PriceOutput(Dollars per shirt)(Shirts)Produce or Shut Down?Profit or Loss?1032405060

In a perfectly competitive market there are large number of firms producing similar and identical…

onsider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average ariable cost (AVC) curves for a typical firm in the industry. 100 90

onsider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average ariable cost (AVC) curves for a typical firm in the industry. 100 90

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Managers of perfectly competitive firms must be cautious when deciding to permanently expand (or contract) the scale of production. What factors should go into the decision to expand the scale of production if the market price of your product increases? (select all that apply) A. Whether your product has a complement in consumption B. If the scale expansion is appropriate and not in excess C. If other firms are likely to enter the market D. Whether the price change is temporary or permanent
Long-run market supply curves are downward sloping if Group of answer choices All of these. input prices fall as the industry expands. firms are identical. the number of firms is restricted in the long run.
Explain in detail
Illustrate to the right, a graph showing a company being profitable in a competitive market in the Long Run selling its product at Market Price (MP*) based on its Average Variable Cost (AVC) and Average Total Cost (ATC) and Marginal Cost (MC). Identify each key point on the graph. Observe the Short - Run Loss information illustrated in the graph to the right. With respect to Price (P*"), Average Variable Cost (AVC), Average Total Cost (ATC), Marginal Revenue (MR), and Marginal Cost (MC), what assumption would you make if the firm was selling its product at P What would happen if this were to continue in the long run? Is there a Shut Down point? ** ? Notice that MR = P
Costs and revenues C р 0 ATC MC D = AR MR Output Given the situation in the market, what will happen in this market in the long run? Most firms will shut down. Firms will enter the industry and the ATC curve will shift downwards due to economies of scale. Firms will leave the industry until supply of goods falls and zero economic profits are made. Firms will leave the industry and the industry will collapse.
qD = 100 – 0.5p, qS = 2p – 20 What is the price elasticity of supply? Is the situation modeled here more likely to be reflecting a short- or long-run equilibrium? Why?
A firm's short-run production function is q = 3L0.2, while its cost function is C = 2L. Furthermore, the firm can sell its output in a perfectly competitive market at p = 40. 6.1 Find the value of the firm's profit when L = 50. L that satisfies the first-order condition for profit 6.2 Calculate the level of maximization. 6.3 Calculate the value of the second order derivative (SOD) that ensures profit is being maximised at the value of L found in 6.2 .