**6. Deriving the short-run supply curve**Consider the competitive market for sports jackets. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry.(Graph Description)The graph presents the cost curves for a firm producing sports jackets. The X-axis represents the quantity of jackets produced (in thousands), ranging from 0 to 80. The Y-axis represents costs in dollars, ranging from 0 to 80.1. **Marginal Cost (MC) Curve**: - Represented by an orange line. - The MC curve initially declines, reaches a minimum point, and then begins to rise.2. **Average Total Cost (ATC) Curve**: - Represented by a green line. - The ATC curve is U-shaped, declining initially, reaching a minimum point, and then rising as quantity increases. 3. **Average Variable Cost (AVC) Curve**: - Represented by a purple line. - The AVC curve is also U-shaped, lying below the ATC curve and following a similar pattern of initial decrease and subsequent increase.A highlighted point on the graph at (48, 36) indicates that at a production level of 48,000 jackets, the associated cost is $36.The intersection points where MC crosses both the AVC and ATC curves are significant in economic analysis, typically indicating the points of minimum cost and optimal production levels. For firms in competitive markets, the MC curve above the AVC curve is typically used to derive the supply curve in the short run. **Supply Decision Analysis for a Firm****Instructional Description:**For each price in the following table, use the graph to determine the number of jackets this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price.| Price (Dollars per jacket) | Quantity (Jackets) | Produce or Shut Down? | Profit or Loss? ||----------------------------|-----------------------------|-----------------------|-----------------|| 4 | | | || 8 | | | || 12 | | | || 36 | 0 | | || 48 | | | || 60 | Either 0 or 12,000 | | || | Either 0 or 36,000 | | |**Analysis Section:**- **Price at $4, $8, and $12:** - Fill in appropriate quantities, decisions on producing or shutting down, and profit or loss based on the graph analysis.- **Price at $36:** - At this price, the quantity produced is 0 jackets. - **Price at $48:** - Fill corresponding details using the graph’s information.- **Price at $60:** - The firm can produce either 0 or 12,000 jackets. - Or alternatively, it can produce either 0 or 36,000 jackets. **Graph Analysis Task:**On the following graph, use the point drawing tool (the 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. (You are given more points to plot than you need.)

The equilibrium of the firm is at point where the Marginal cost curve intersects the marginal…

tabie, use the graph to de CRets thiS firm woult in its pront. ASsume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 4 12 36 48 60 12,000 36,000

tabie, use the graph to de CRets thiS firm woult in its pront. ASsume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero jackets and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per jacket) (Jackets) Produce or Shut Down? Profit or Loss? 4 12 36 48 60 12,000 36,000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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