can someone else please answer this. Previous answer that was provided does not make sense. I have posted this several times and the same person keeps posting the same answer. Thank you!

Here is an example to help you understand the theory of the firm. Suppose I am a firm that makes sweaters. I produce sweaters using knitting needles, yarn, and my time. If I don't make sweaters, my next best alternative is working on a garbage truck which I can do for $3 an hour. It costs $1 to buy a pair of knitting needles (they last one day and then fall apart), and $1 for the yarn to make one sweater. The following chart describes the costs to me of knitting various numbers of sweaters.

Numbers of	Total hours spent knitting	tc	ac	mc
sweaters/day
1	1	5	5	5
2	2	9	4.5	4
3	3 1/6	13.5	4.5	4.5
4	5	20	5	6.5
5	8	30	6	10
6	12	43	7.16	13

You might want to graph AC and MC as a function of q. There are a number of things to notice about this chart. What the chart shows are the costs of producing various quantities of sweaters, taking into account the opportunity cost of my time. I've assumed that as I produce more sweaters per day, I have to pace myself and take a little bit longer per sweater to keep from making mistakes. Notice that when MC is below AC, AC falls. When MC is above AC, AC rises. Also notice that the sum of all previous MCs equals TC. What is Pe? Answer: $4.50. What is the minimum point of AC in terms of quantity, qe? There are two quantities of qe because we have assumed away fractions of a sweater. (If TC, AC, and MC, were continuous functions, that is, if we allowed for making fractions of a sweater, then the actual qe would be between 2 and 3.) If price were Pe (4.50) I would be indifferent between making 2 or 3 sweaters. In both cases, I would just break even, making zero profits. Suppose I made 2 sweaters--my revenue would be $9. I would spend $3 in raw materials ($2 for the yarn and $1 for the needles) so my income for the 2 hours of work would be $6. This would be just enough to get me to knit sweaters rather than ride the garbage truck. Actually, I would be indifferent. So, when the price of sweaters hits $4.51, I become a sweater maker but we round it to $4.50 making the assumption that when I'm indifferent I choose sweaters. What does my supply curve look like? Suppose the price of sweaters is $10.00. How many sweaters will I make? The answer is that I choose to make sweaters up until the point where P = MC, which in this case is 5 sweaters per day. My sweater revenue will be $50. I will have to spend $6 on yarn and needles per day, leaving me with $44 to live on. My profits, however, are only $20, since I will have to spend 8 hours per day knitting that I could

have spent on the garbage truck at $3 per hour (or $24). Verify that my profits will be smaller if I choose a quantity other than 5. If everybody who can make sweaters can also drive a garbage truck for $3 per hour, what will the supply curve of sweaters look like? What determines the number of people in the world making sweaters? What happens when there is an increase in demand? In the long-run, people will leave garbage trucks for sweaters. Do you see why? Additional Questions: 1. How will the analysis change if there is an increase in demand for garbage truck workers that drives up the wage of garbage men to $4? 2. What will be the effect on sweater prices? 3. How would your answer change if instead, I found a job that paid $4 and hour, but all other sweater makers still had $3 as their next best alternative? 4. How would the analysis change if I figured out a way to cut the time in half that it takes to do the knitting? 5. What if everybody figured it out?