Answer to Question #287242 in Microeconomics for Jawad shah

Question

Label the curves in the following graph.

a. At each market price, P1, P2, and P3, at what output level would the firm produce?

b. What profit would be earned if the market price was P1?

c. What are the shutdown and break-even prices

Answer 1

a. At each market price, P1, P2, and P3, the firm would produce at output level s, Q1, Q2, Q3.

b. The profit that would be earned if the market price was P1 is:

$TP = (P1 - ATC)×Q1.$

c. The shutdown price is P = AVC and break-even price is P = ATC.