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Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? Shut down Shut down 10 Loss 20 30,000 Loss 32 35,000 Produce Loss 40 37,500 Produce Loss 50 40,000 Produce Break even 60 42,500 Produce Profit

Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? Shut down Shut down 10 Loss 20 30,000 Loss 32 35,000 Produce Loss 40 37,500 Produce Loss 50 40,000 Produce Break even 60 42,500 Produce Profit

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Table Analysis: Producing and Profitability Decision Table** This table outlines the decision-making process for a firm producing jackets, given different price points. The firm must decide how many jackets to produce (if any) to maximize profit. At each price level, the analysis determines whether the firm should produce, shut down, or be indifferent regarding production in the short run, as well as whether the firm will make a profit, incur a loss, or break even. ### Table Details: | Price (Dollars per jacket) | Quantity (Jackets) | Produce or Shut Down? | Profit or Loss? | |----------------------------|---------------------|-----------------------|-----------------| | 10 | 0 | Shut down | Loss | | 20 | 30,000 | Shut down | Loss | | 32 | 35,000 | Produce | Loss | | 40 | 37,500 | Produce | Loss | | 50 | 40,000 | Produce | Break even | | 60 | 42,500 | Produce | Profit | **Explanation:** - **Price $10 and $20**: The firm should shut down production as the prices are insufficient to cover the firm's variable costs, leading to a loss. - **Price $32 and $40**: The firm should produce the jackets since the price is above the average variable cost, though it still results in a loss. - **Price $50**: At this price, the firm breaks even, covering all costs without making a profit or a loss, so it should continue production. - **Price $60**: The firm should produce 42,500 jackets as this price point allows it to make a profit. By analyzing these prices alongside the production costs, firms can make informed decisions on maintaining operations or shutting down in the short run based on profitability and cost coverage.
Transcribed Image Text:**Table Analysis: Producing and Profitability Decision Table** This table outlines the decision-making process for a firm producing jackets, given different price points. The firm must decide how many jackets to produce (if any) to maximize profit. At each price level, the analysis determines whether the firm should produce, shut down, or be indifferent regarding production in the short run, as well as whether the firm will make a profit, incur a loss, or break even. ### Table Details: | Price (Dollars per jacket) | Quantity (Jackets) | Produce or Shut Down? | Profit or Loss? | |----------------------------|---------------------|-----------------------|-----------------| | 10 | 0 | Shut down | Loss | | 20 | 30,000 | Shut down | Loss | | 32 | 35,000 | Produce | Loss | | 40 | 37,500 | Produce | Loss | | 50 | 40,000 | Produce | Break even | | 60 | 42,500 | Produce | Profit | **Explanation:** - **Price $10 and $20**: The firm should shut down production as the prices are insufficient to cover the firm's variable costs, leading to a loss. - **Price $32 and $40**: The firm should produce the jackets since the price is above the average variable cost, though it still results in a loss. - **Price $50**: At this price, the firm breaks even, covering all costs without making a profit or a loss, so it should continue production. - **Price $60**: The firm should produce 42,500 jackets as this price point allows it to make a profit. By analyzing these prices alongside the production costs, firms can make informed decisions on maintaining operations or shutting down in the short run based on profitability and cost coverage.
**Instruction for Activity:** On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. *(Note: You are given more points to plot than you need.)* **Graph Explanation:** - **Title:** Firm's Short-Run Supply - **X-axis:** Quantity (Thousands of jackets), ranging from 0 to 50. - **Y-axis:** Price (Dollars per jacket), ranging from 0 to 100. - **Quadrant:** The graph is divided into a grid for plotting. - **Symbol:** Orange square symbols are provided for plotting. This graph is used to demonstrate the relationship between the price of jackets and the quantity supplied by a firm in the short run. Participants will use the provided square markers to indicate the curve at points where the firm supplies a positive output.
Transcribed Image Text:**Instruction for Activity:** On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. *(Note: You are given more points to plot than you need.)* **Graph Explanation:** - **Title:** Firm's Short-Run Supply - **X-axis:** Quantity (Thousands of jackets), ranging from 0 to 50. - **Y-axis:** Price (Dollars per jacket), ranging from 0 to 100. - **Quadrant:** The graph is divided into a grid for plotting. - **Symbol:** Orange square symbols are provided for plotting. This graph is used to demonstrate the relationship between the price of jackets and the quantity supplied by a firm in the short run. Participants will use the provided square markers to indicate the curve at points where the firm supplies a positive output.
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