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Suppose that the market for sports Watches is a competitive market. The following graph shows the dally cost curves of a firm operating in market.
Suppose that the market for sports Watches is a competitive market. The following graph shows the dally cost curves of a firm operating in market. 2 100 90 B0 70 60 PRICE (Dollars per watch) 50 ATC 40 30 20 MC AVC 10 90 100 10 20 30 40 50 60 70 80 QUANTITY (Thousands of watches) 10,000 20,000 30,000 40,000 For each price in the follow calculate the firm's optimal quantity of units to produce, and determine the profit or loss it produces at that quantity, using the data fro 50,000 ph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You 70,000 the purple points (diamond symbols) on the graph to see precise Information on average variable cost) Price Total Revenue Fixed Cost Variable Cost 90,000 (Dollars per watch) s) (Dollars) (Dollars) (Dollars) (Dollars) 25.00 520,000 40.00 520,000 520,000 Profit 65.00 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 $520,000 per day. In other words, if it shuts down, the firm would suffer losses of $520,000 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 -- per watch
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