Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per ) 100 90 80 70 60 50 40 30 20 10 0 ATC Z AVC 0 5 MC 10 15 20 25 30 35 40 QUANTITY (Thousands of pans) Price (Dollars per pan) 25.00 70.00 100.00 45 50 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.) Quantity (Pans) ? Total Revenue Fixed Cost (Dollars) (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 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 the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per pan.
Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per ) 100 90 80 70 60 50 40 30 20 10 0 ATC Z AVC 0 5 MC 10 15 20 25 30 35 40 QUANTITY (Thousands of pans) Price (Dollars per pan) 25.00 70.00 100.00 45 50 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.) Quantity (Pans) ? Total Revenue Fixed Cost (Dollars) (Dollars) 1,600,000 1,600,000 1,600,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 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 the expiration of a building lease). This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is per pan.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter7: Production, Costs, And Industry Structure
Section: Chapter Questions
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![Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.
PRICE (Dollars per p)
100
90
80
70
28 899
00
50
40
30
20
10
0
0
ATC
Z
AVC
MC
5 10 15 20 25 30 35 40
QUANTITY (Thousands of pans)
Price
(Dollars per pan)
25.00
70.00
100.00
45 50
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.)
Quantity
(Pans)
?
Total Revenue Fixed Cost
(Dollars)
(Dollars)
1,600,000
1,600,000
1,600,000
Variable Cost
(Dollars)
Profit
(Dollars)
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 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 the expiration of a building lease).
This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is
per pan.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b04727d-e884-4f99-b607-7c54c83234e2%2F1e2c0080-9ea0-4f75-89fb-a16103ab8f6b%2F9ldxmma_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose that the market for frying pans is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.
PRICE (Dollars per p)
100
90
80
70
28 899
00
50
40
30
20
10
0
0
ATC
Z
AVC
MC
5 10 15 20 25 30 35 40
QUANTITY (Thousands of pans)
Price
(Dollars per pan)
25.00
70.00
100.00
45 50
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.)
Quantity
(Pans)
?
Total Revenue Fixed Cost
(Dollars)
(Dollars)
1,600,000
1,600,000
1,600,000
Variable Cost
(Dollars)
Profit
(Dollars)
If the firm shuts down, it must incur its fixed costs (FC) in the short run. In this case, the firm's fixed cost is $1,600,000 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 the expiration of a building lease).
This firm's shutdown price-that is, the price below which it is optimal for the firm to shut down-is
per pan.
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