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Unformatted text preview: 49 (b) (c) The short-run supply curve for the firm is the part of the srmc curve above the sravc curve. If p < minimum sravc, zero output is supplied. APS5 3 (d) From the supply curve, we see that 6,000 should be supplied. At this level tr = 6 × $30 = $180 and tc are $134 (from table) so profit is $46. (e) If price were about $22 per thousand, the firm would set the output at about 5,000 and tr = tc (price is at mc = atc). (f) In the short run the firm will produce 4,000 at price $16, losses are tc- tr = $92 - $16 × 4 = $28. Observe that this is still smaller than shut-down losses, $50. In the long run the firm can avoid losses by not producing anything. 5.(a) See below. (b) Choose Plant B since costs will be smallest to produce 120 units with Plant B. (600 < 720 < 840). (c) To produce 80 units with Plant B it costs 560. However if Plant A had been built it would only cost 400....
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This note was uploaded on 03/27/2009 for the course ECON 1110 taught by Professor Wissink during the Fall '06 term at Cornell.
- Fall '06