Question

15:08 Attachment Done 1 of 8 1. Use the information in Figure A above to answer the following questions The Exit Price b. The Shut Down Price c Assume the market price is $14 fthe firm chooses the profit maximizing output level, the firm wll ncur a Proficincur a Loss/break d. the fms Prof or Loss equals even Show your work the fim shuts down, the frm will inor a Profincur a Loss/break even the fims Profit or Los if anyl equals Show your work or explain how you calculated the lossprfit inthe short run, this firm should (produce/shut down Write a short explanation for your anse Page 1 of 8 in the long nn, this fiem should (produceleit 9 Wite a short explanation for your answer Assuming that the firm is using the plant that minimiees costs in the long run, is the industry in h. equlibrium at this price? the industry is not in equilbrium at this price, do you expect fims to lentenlexit /expand their plant contract their plant/ increase outputidecreane outpu Based on your answer to the previous question, the Market Supply will ht ighsht left/not shift) and the Market Price will n decrease/emain the same the industry is not in equilibrium at this price, what price do you expect in the long nun when the k Write a short explanation for your answer industry reaches equilbrium

all the information is on the graph

Answer 1

1`

1. The exit price is at the minimum of average cost. Therefore the exit price is $10( Average cost is minimum where AC cuts MC)
2. The shut down price is at the minimum of average variable cost. Therefore, shut down price is $4.
3. Market price = $ 14.
4. Profit ( because at price = $14 price is higher than average cost)

Profit = (P –AC)*Q

Profit = (14-11)*105 = $315

5. Loss (because at shut down point Price <AC)

Loss = (4-14)*31.5 = -$315

*We are supposed to do only four sub-parts to a question. For solution to other sub-parts please post as a separate question.