Question 1

7. Profit maximization in the cost-curve diagram The following graph plots daily cost curves for a firm operating in the competitive market for instant pots. Hint: Once you have positioned the rectangle on the graph, select a point to observe its coordinatesi @ 100 W 90 W an _ Prot or Loss 70 W ATC 60 W 40 W 30 W AVC PRICE (Dollars per instant pot) 20 - MC 10 u 1 I I I I I I I I I I O 5 10 15 20 25 30 35 40 45 50 QUANTlTY (Thousands of instant pots per day) In the short run, given a market price equal to $50 per instant pot, the rm should produce a daily quantity of V instant potsi On the preceding graph, use the blue rectangle { circle symbols) to ll in the area that represents prot or loss of the rm given the market price of $50 and the quantity of production from your previous answer. Note: In the following question, enter a positive number regardless of whether the rm earns a profit or incurs a loss. The rectangular area represents a short-run V of- thousand per day for the rm. Continue without saving The following graph shows supplyr and demand for a perfectly competitive market for light-sabers. On the following graph, use the grey point (star symbol) to indicate the equilibrium quantity. Then use the green points (triangle symbol) to shade the area representing consumer surplus. 4O 35 O 36 Demand 32 30 25 a 25 24 Equilibrium quantity 22 20 19 15 Demand Consumer surplus 14 2 Ir 1 0 Supply PRICE (Dollars per light-saber] thm a 2 4 6 810121416132022242628303234363840 QUANTITY [Light-sabers) Based on the graphr consumer surplus in the market for light-sabers is equal to . Suppose the market for light-sabers was taken over by jSpada Corporation, a monopolist producing unique light-sabers. The following graph shows supply and demand forj-Spada. Note that the demand curve facing the monopolist is the same as in the competitive market. On the following graph, use the black paint (cross symbol) to indicate the profit-maximizing quantity. Then use the blue point (circle symbol) to indicate the profit-maximizing price. Finally, use the green points {triangle symbol) to shade the area representing consumer surplus. On the following graph, use the black point (cross symbol) to indicate the profit-maximizing quantity. Then use the blue point (circle symbol) to indicate the profit-maximizing price. Finally, use the green points { triangle symbol) to shade the area representing consumer surplus. @ Demand 23 + 24 Prot-maximizing quantity 20 0 Demand Prot-maximizing price PRICE (Dollars per light-saber) 10 Supply Consumer surplus MR 0 2 4 6 8101214161&2022242628303234363840 QUANTITY (Light-sabers} Based on the graphs, under monopoly, equilibrium quantity is V and equilibrium price is V in the competitive market. And consumer surplus under monopoly is equal to _ which is V in the competitive market