00:02
So let's go over how we would do this question.
00:36
The profit maximizing quantity is where marginal cost is equal to marginal revenue.
00:42
So this is going to be 7.
00:50
The price it will charge is given by the demand curve, which is equal to marginal revenue and price in perfect competition.
00:57
So the price is going to be 28.
01:07
We want the total cost.
01:09
So at this level of output, draw the line up to average total cost.
01:15
Average total cost is 32 so we do 32 times 7 because average total cost times quantity gives you the total cost so that's 224 to get total variable cost to do average variable cost times the quantity so we find the average variable cost so that's equal to 14 gives you 98 do we want the fixed cost to find find average fixed costs.
02:36
That gives you 18.
02:40
Do 18 times 7.
02:43
That gives you 126.
02:51
So we want the profit.
02:52
So for profit, profit is total revenue minus total cost.
02:59
Total revenue is price times quantity.
03:01
So we determined that in a and b.
03:03
So that's 28 times 7.
03:05
The total cost was 224.
03:12
That gives you negative 28.
03:15
So they're operating at a loss.
03:25
What is its profit if it shuts down? if the firm shuts down, it will have no revenue...