5. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a rm operating in the competitive market for porch swings. 40 36 32 E 23 E E ._ 24 ID CL F.\" E 20 a D ATC ~r 15 \"J 9 n: [l 12 AVG I} 2 4 B 3 10 12 14 16 18 20 QUANTITY (Thousands of swings) 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 rm'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 infonnatlon. ) Price Quantity Total Revenue Fixed Cost Variable Cost Prot (Dollars per swing) (Swings) (Dollars) (Dollars) (Dollars) (Dollars) If the rm shuts down, it must incur its xed costs (PC) in the short run. In this case, the finn's fixed cost is $44,000 per day. In other words, if it shuts down, the rm would suffer losses of $44,000 per day until its fixed costs end (such as the expiration of a building lease). This finn's shutdown pricethat is, the price below which it is optimal for the firm to shut downis V per swing. 1,000 4,000 6,000 Using the following table, fo ice level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to 8,000 determine the firm's total v st, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shu 12,000 n, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) 15,000 Price Total Revenue Fixed Cost Variable Cost Profit 18,000 (Dollars per swing) (Dollars) (Dollars) (Dollars) (Dollars) 10.00 44,000 16.00 44,000 40.00 44,000 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 $44,000 per day. In other words, if it shuts down, the firm would suffer losses of $44,000 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 swing.4,000 Using the following table, f. 6 000 'ce ievei, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's totai t, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and sh 8'000 , it wili choose to produce. (Hint: Select purple points [diamond symhois] on the graph to receive exact average variable cost information.) 12(000 Price 15 Total Revenue Fixed Cost Variable Cost Prot (Dollars per swing) (Dollars) (Dollars) (Dollars) (Dollars) If the rm shuts down, it must incur its xed costs (PC) in the short run. In this case, the firm's fixed cost is $44,000 per day. In other words, if it shuts down, the rm would suffer losses of $44,000 per day until its xed costs end (such as the expiration of a building lease). This rm's shutdown pricethat is, the price below which it is optimal for the firm to shut downis V per swing. Using the following table, f 41100 'ce level, calculate the optimal quantity of units for the rm to produce. Using the data from the graph to determine the .rm's total t, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent 6,000 between producing and sh , it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost in formation. ) 8' 0 00 Price Total Reve nue Fixed Cost \\la ri a b le Cost Prot (Dollars per swing ) (Dollars) (Dollars) (Dollars) (Dollars) 1000 E 44000 I | | | E l l l I _v E I I I I If the rm shuts down, it must incur its xed costs (FC) in the short run. In this case, the firm's xed cost is $44,000 per day. In other words, if it shuts down, the rm would suffer losses of $44,000 per clay 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 swing. Using the folio wing table, for each price level, caicuiate the optimal quantity of units for the rm to produce. Using the data from the graph to determine the rm's total variable cost, caicuiate 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.) Price Quantity Total Revenue Fixed Cost Variable Cost Prot (Doiiars per swing) (Swings) (Dollars) (Boilers) (Dollars) (Dollars) _v E E I m on I _v E E I $20.00 .000 per day. In other words, if it building lease). If the rm shuts down, it must incur its xed costs (FC) in the short run. In this case, the firm's fixed shuts down, the rm would suffer losses of $44,000 per day until its fixed costs end (such as the expi This firm's shutdown pricethat is, the price below which it is optimal for the firm to shut downis V per swing