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14. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market
14. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for rompers. 01 C) 4:. 01 A C) m 01 (a! C} ATC M M C) 01 PRICE (Dollars per romper) 3 AVG _l D MC 0 2 4 B 8 10 12 14 16 18 20 QUANTITY (Thousands of rompers) Using the following table, for each price level, calculate the optimal quantity of units for the rm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the prot 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.) Using the following table, fo 41500 - level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total va 7 500 , calculate the prot or loss associated with producing that quantity. Assume that if the rm is indifferent . between producing and shu it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) 10'000 Price 12'000 Total Revenue Fixed Cost Variable Cost Profit (Dollars per romper) 15 000 s) (Dollars) (Dollars) (Dollars) (Dollars) 1 3 5,000 12.50 18,000 27.50 135,000 45.00 v 135,000 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 rm 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 pricethat is, the price below which it is optimal for the firm to shut downis V per romper
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