Consider a perfectly competitive market for shirts. The following graph shows th

Question

Consider a perfectly competitive market for shirts. The following graph shows the daily cost curves of a firm operating in this market. PRICE AND COST (Dollars per shirtl 20 Profit or Loss MC 16 ATC 12 AVC 10 OUTPUT (Thousands of shirts per day HelpClear All In the short run, at a market price of $8 per shirt, this firm will choose to produce shirts per day On the previous graph, use the blue rectangle (circle symbols) to shade the area representing the firm's profit or loss if the market price is $8 and the firm chooses to produce the quantity you already selected. Tool tip: Mouse over the shaded region on the graph to see its area The area of this rectangle indicates that the firm would have of per day For each price in the following table, calculate the firm's optimal quantity of units produced and determine the profit or loss if it produces at that quantity. Use the data from the previous graph to identify its total variable cost. Assume that if the firm is indifferent between producing and shutting down, it will produce. (Note: You can mouse over the purple points [diamond symbols] on the previous graph to see precise information on average variable cost.)

Explanation / Answer

Answer to 1st blank: 4 thousand

Answer to 2nd blank: $20,000

Answer to 3rd blank: Loss

Answer to 3rd blank: $7.5 per shirt

P($) Q(units) TR($) FC VC Profit/Loss($) 6 3000 18,000 27,000 18,000 27,000 (Loss) 12 6000 72,000 27,000 45,000 0 (No profit/No Loss) 18 9000 162,000 27,000 90,000 45,000 (Profit)

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