6. Deriving the short-run supply curve Consider the competitive market for halogen lamps. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry 100 30 TO ATC COSTS Dollars) AVC QUANTITY (Thousands of 100 For each price in the following table, use the graph to determine the number of lamps this fimm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss or break even at each price Price Quantity (Dollars per lamp) (Lamps) Produce or Shut Down? Profit or Loss? 15 20 25 55 20 85 On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output (Note: You are given more points to plot than you need.) 2 30 10 Firm's Short-Run Supply 70 50 PRICE (Olars per la 8 8 20 10 00 50 70 30 QUANTITY (Thousands of lamps) 100 Suppose there are 7 firms in this industry, each of which has the cost curves previously shown on the following graph, use the orange points (square symbol) to piot points along the portion of the industry's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. Note: Dashed drop lines will automatically extend to both axes. 2 100 -0- 90 Demand Industry's Short-Run Supply 3 TO Equilibrium PRICE Desperta 8 8 40 30 10 0 70 firms will neither enter nor ext 630 700 2100350 400 30 QUANTITY (Thousands of lamps) some firms will enter some firms will exit At the current short run market price, firms will in the short run in the long run Grade it Now Save & Continue