Question

Suppose that the market for blenders is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. PRICE (Dollars per blender) 100 90 80 70 ATC 60 50 40 30 AVC 20 10 MC 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of blenders) For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.) Price (Dollars per blender) | Quantity (Blenders) | Total Revenue (Dollars) | Fixed Cost (Dollars) | Variable Cost (Dollars) | Profit (Dollars) 25.00 | 30,000 | 750,000 | 1,600,000 | 750,000 | -1,600,000 70.00 | 40,000 | 2,800,000 | 1,600,000 | 1,200,000 | 0 100.00 | 45,000 | 4,500,000 | 1,600,000 | 1,575,000 | 1,325,000 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 $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 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—is $25.00 per blender.

          Suppose that the market for blenders is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.

PRICE (Dollars per blender)
100
90
80
70 ATC
60
50
40
30 AVC
20
10 MC
0
0 5 10 15 20 25 30 35 40 45 50
QUANTITY (Thousands of blenders)

For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.)

Price (Dollars per blender) | Quantity (Blenders) | Total Revenue (Dollars) | Fixed Cost (Dollars) | Variable Cost (Dollars) | Profit (Dollars)
25.00 | 30,000 | 750,000 | 1,600,000 | 750,000 | -1,600,000
70.00 | 40,000 | 2,800,000 | 1,600,000 | 1,200,000 | 0
100.00 | 45,000 | 4,500,000 | 1,600,000 | 1,575,000 | 1,325,000

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 $1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of $1,600,000 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—is $25.00 per blender.

Suppose that the market for blenders is a competitive market. The following graph shows the daily cost curves of a firm operating in this market.

PRICE (Dollars per blender)
100
90
80
70 ATC
60
50
40
30 AVC
20
10 MC
0
0 5 10 15 20 25 30 35 40 45 50
QUANTITY (Thousands of blenders)

For each price in the following table, calculate the firm's optimal quantity of units to produce, and determine the profit or loss if it produces at that quantity, using the data from the graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Hint: You can select the purple points [diamond symbols] on the graph to see precise information on average variable cost.)

Price (Dollars per blender) | Quantity (Blenders) | Total Revenue (Dollars) | Fixed Cost (Dollars) | Variable Cost (Dollars) | Profit (Dollars)
25.00 | 30,000 | 750,000 | 1,600,000 | 750,000 | -1,600,000
70.00 | 40,000 | 2,800,000 | 1,600,000 | 1,200,000 | 0
100.00 | 45,000 | 4,500,000 | 1,600,000 | 1,575,000 | 1,325,000

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 1,600,000 per day. In other words, if it shuts down, the firm would suffer losses of1,600,000 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—is 25.00 per blender.

Added by Jacob B.

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