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Prol'lt maxlmlsatlon in the onst-ourve diagram as A; E Consider a perfectly competltlve market for frying pans. The followlng graph shows the dailyr...


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1. Prol'lt maxlmlsatlon in the onst-ourve diagram as A; E Consider a perfectly competltlve market for frying pans. The followlng graph shows the dailyr cost curves of a firm operating in
thls market. PRICE [Dollars per pan] 2'3 Profit or Loss 2D In in 5D so IIIUJIIIJIITIT‘I:r [Thousands of pans per daiyl W m [n the short an, at a market price of $8 per panr this firm I.vill choose to produce pans per day. fin the previous graph, use the blue rectangle [circle symbols} to shade the area representing the firm‘s proflt or loss if the
market price is $3 and the firm chooses to produce the quantity you already selected. Tool tip; Mouse over the shaded reglon on
the graph to see Its area. The area of his reclII nglc indicates that the firm would have of Per clay. For each price in the following table. calculate the limfs optlmal quantity of units produced and determine the profit or loss if It
produces at that quantity. Use the data from the pnevlous graph to identify its total variable cost. Asmme that if the him Is
Indifferent between producing and shutting down, It will produce. (Hope: You can mouse over the purple points [diamond
symbols] on the previous graph to see preclse information on average variable cost.) Prloe
{Dollars per Quantity Total Revenue Flute-d Cost 1liar-labile cost Profit
pan} {Pans per day} {TR = F ill 11} {It} {vc} [TI - TC]:
15 HEEJJIJEI
12 135.0%
13 135.00-[1 [f a firm shuts dD'iI'il'l‘l, it incurs Its fixed costs {FE} In the short run. In this case, the fixed cost of the firm producing frying pans is
$135,0W per day. In other words. If it shuts doII'Irnr the firm |would suffer losses of $135,DDD per day untll Its fixed costs end
{such as the expllation of a building lease]. ThIs firrn's shutdown price—that is, the prloe below whlch It Is optimal for the firm to
shut down—Is per pan.

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