*8. Minnie is one producer in the perfectly competitive pearl industry. Minnie’s cost curves are shown below. Pearls sell for $100, and in maximizing profits, Minnie produces 1,000 pearls per month.

a. Find the area on the graph that illustrates the total revenue from selling 1,000 units at $100 each.

b. Find the area on the graph that indicates the variable cost of producing those 1,000 units.

c. Find the area on the graph that indicates the fixed cost of producing those 1,000 units.

d. Add together the two areas you found in (b)
and

(c) to show the total cost of producing those 1,000 units.

e. Subtract the total cost of producing those 1,000 units from the total revenue from selling those units to determine the firm’s profit.
Show the profit as an area on the graph.

Transcribed Image Text:

Price & cost ($/unit) A $100 K+ M I 0 BC H MC ATC Ei TL AVC F G 1,000 Quantity