For each price in the following table, calculate the firm's optimal quantity of units produced and determine the economic profit or loss if it produces at that quantity. Use the data from the previous grach to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Note: You can mouse over the purple points (diamond symbols) on the previous graph to see precise information on average variable cost.) Price (P) 16 12 18 Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) Profit (TR-TC) If a firm shuts down, it incurs its fleed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $167,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 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- per shirt.
For each price in the following table, calculate the firm's optimal quantity of units produced and determine the economic profit or loss if it produces at that quantity. Use the data from the previous grach to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Note: You can mouse over the purple points (diamond symbols) on the previous graph to see precise information on average variable cost.) Price (P) 16 12 18 Quantity (Q) Total Revenue (TR=PxQ) Fixed Cost (FC) $162,000 162,000 162,000 Variable Cost (VC) Profit (TR-TC) If a firm shuts down, it incurs its fleed costs (FC) in the short run. In this case, the feed cost of the firm producing shirts is $167,000 per day. In other words, if it shuts down, the firm would suffer losses of $162,000 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- per shirt.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter8: Perfect Competition
Section: Chapter Questions
Problem 1SCQ: Firms ill a perfectly competitive market are said to be price takers that is, once the market...
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