Consider the competitive market for halogen lamps. 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.

For each price in the following table, use the graph to determine the number of lamps 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 indifferent between producing zero lamps and the profit?maximizing quantity. Also, indicate whether the firm /n11 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.

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.) Suppose thin are 10 firms in this industry, each of which has the cost curves previously shown. On the following graph, use the orange points (square symbol) to plot points along the portion of the industry'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.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market.

Note :

Dashed drop lines will automatically extend to both axes.

At the current short-run market price, firms will ____________, in the short run, In the long run, _________.

Transcribed Image Text:

COSTS (Dollars) 100 90 80 70 60 40 30 20 10 0 0 □ MC ATC AVC 5 10 15 20 25 30 35 QUANTITY (Thousands of lamps) 40 45 50 Price (Dollars per lamp) 10 20 32 40 50 60 Quantity (Lamps) Produce or Shut Down? Profit or Loss? Suggestions PRICE (Dollars per lamp) 100 90 80 70 60 50 40 30 20 10 0 0 5 10 15 20 25 30 35 QUANTITY (Thousands of lamps) 40 45 50 Firm's Short-Run Supply ? PRICE (Dollars per lamp) 100 90 80 70 60 40 30 20 10 0 0 Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Thousands of lamps) Industry's Short-Run Supply Equilibrium COSTS (Dollars) 100 90 80 70 60 40 30 20 10 0 0 □ MC ATC AVC 5 10 15 20 25 30 35 QUANTITY (Thousands of lamps) 40 45 50 Price (Dollars per lamp) 10 20 32 40 50 60 Quantity (Lamps) Produce or Shut Down? Profit or Loss? Suggestions PRICE (Dollars per lamp) 100 90 80 70 60 50 40 30 20 10 0 0 5 10 15 20 25 30 35 QUANTITY (Thousands of lamps) 40 45 50 Firm's Short-Run Supply ? PRICE (Dollars per lamp) 100 90 80 70 60 40 30 20 10 0 0 Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Thousands of lamps) Industry's Short-Run Supply Equilibrium

Answer rating: 100% (QA)

Consider the Table given below Price dollar per lamp Quantity Lamps Produces but down Profit or loss ... View the full answer