Question

Consider a firm facing conventional
technology with U-shaped AVC and ATC and
MC. The firm wants to maximize profits
given an exogenously fixed price of P = $20.
Further, suppose the firm correctly
determines that its short run profit
maximizing output is 1000 given its costs
and the exogenously fixed price of $20.
Question 1A
Using the axes as constructed below, depict
marginal revenue and marginal cost curves
that would support the conclusion that the
optimal short run output is q = 1000. Be sure
to label all important values.
please give me the answer with graph...​

Answer 1

Explanation:

Consider a firm facing conventional technology with U-shaped AVC and ATC and MC. The firm wants to maximize profits given an exogenously fixed price of P = $20. Further, suppose the firm correctly determines that its short run profit maximizing output is 1000 given its costs and the exogenously fixed price of $20.

Using the axes as constructed below, depict marginal revenue and marginal cost curves that would support the conclusion that the optimal short run output is q = 1000. Be sure to label all important values.



Reproduce your graph from Question 1, but add an average total cost curve to the picture in such a way that the firm is earning zero profits (π = 0).

Again, reproduce your graph from Question 1. For this question, depict a different ATC curve, one where the firm has negative profits (π < 0) at the profit maximizing output of 1000. Add an additional average cost curve that will allow you to determine whether to shutdown or keep producing at Q = 1000.

Should the firm produce Q = 1000 in the short run or should it shutdown, producing Q = 0?