The following graph plots daily cost curves for a firm operating in the competitive market for...
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The following graph plots daily cost curves for a firm operating in the competitive market for jumpsuits. PRICE (Dollars per jumpsuit) 50 45 40 35 30 25 20 15 10 5 0 0 + 2 e MC ATC 4 AVC 6 8 10 12 14 16 QUANTITY (Thousands of jumpsuits) O Price Quantity (Dollars per jumpsuit) (Jumpsuits) 12.50 27.50 45.00 18 20 ? Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Total Revenue Fixed Cost Variable Cost (Dollars) (Dollars) (Dollars) 135,000 135,000 135,000 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 $135,000 per day. In other words, if it shuts down, the firm would suffer losses of $135,000 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 jumpsuit. The following graph plots daily cost curves for a firm operating in the competitive market for jumpsuits. PRICE (Dollars per jumpsuit) 50 45 40 35 30 25 20 15 10 5 0 0 + 2 e MC ATC 4 AVC 6 8 10 12 14 16 QUANTITY (Thousands of jumpsuits) O Price Quantity (Dollars per jumpsuit) (Jumpsuits) 12.50 27.50 45.00 18 20 ? Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Total Revenue Fixed Cost Variable Cost (Dollars) (Dollars) (Dollars) 135,000 135,000 135,000 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 $135,000 per day. In other words, if it shuts down, the firm would suffer losses of $135,000 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 jumpsuit.
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Decision on how much to produce must be made by businesses in the near term They must deal with aver... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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