Graded Homework (Ch 14) 6. Deriving the short-run supply curve Consider the competitive market for dress shirts. 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 90 2 80 20 70 COSTS (Dollars) ATC 50 40 30 20 10 0 AVC MC- 0 5 10 16 20 25 30 35 40 45 50 QUANTITY (Thousands of shirts) Graded Homework (Ch 14) For each price in the following table, use the graph to determine the number of shirts this firm 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 shirts 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 (Dollars per shirt) 10 20 Quantity (Shirts) Produce or Shut Down? Profit or Loss? 32 40 50 60 Graded Homework (Ch 14) 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.) 100 90 80 PRICE (Dollars per shirt) 30 gg 50 40 98 70 70 20 10 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of shirts) -0- Firm's Short-Run Supply Graded Homework (Ch 14) On the following graph, use the orange points (square symbol) to plot 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. PRICE (Dollars per shirt) 60 100 90 80 70 60 50 40 30 20 10 Demand 0 35 70 105 140 175 210 245 200 315 350 QUANTITY (Thousands of shirts) Industry's Short-Run Supply Equilibrium At the current short-run market price, firms will in the short run. In the long run