The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for sun lamps. COSTS (Dellars) 72 04 8 50 24 16 . 0 D Price (Dollars per lamp) 12 36 48 60 MC D 6 10 ATC AVC 32 40 06 QUANTITY(Thousands of lamps) 40 04 For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether the firm will eam a profit, incur a loss, or break even at each price. Quantity (Lamps) 72 (2) Produce or Shut Down? Profit or Loss?

The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for sun lamps. COSTS (Dellars) 72 04 8 50 24 16 . 0 D Price (Dollars per lamp) 12 36 48 60 MC D 6 10 ATC AVC 32 40 06 QUANTITY(Thousands of lamps) 40 04 For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether the firm will eam a profit, incur a loss, or break even at each price. Quantity (Lamps) 72 (2) Produce or Shut Down? Profit or Loss?

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 23RQ: What two lines on a cost curve diagram intersect at the shutdown point?

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