Suppose Veronica Sells Teapots in the Perfectly Competitive Teapot Market

question 67

Essay

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
$\begin{array}{|c|c|}\hline \text { Output per } & \\ \text { Day } & \text { Total Cost } \\\hline 0 & \$ 20 \\\hline 1 & 32 \\\hline 2 & 37 \\\hline 3 & 48 \\\hline 4 & 61 \\\hline 5 & 75 \\\hline 6 & 92 \\\hline 7 & 113 \\\hline 8 & 136 \\\hline\end{array}$
Suppose the current equilibrium price in the teapot market is $20.To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

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Definitions:

Short-Run Phillips Curve

A graphical representation that shows an inverse relationship between the rate of inflation and the unemployment rate in the short-term.

World Commodity Prices

The prices of goods such as oil, gold, coffee, etc., that are traded internationally and can fluctuate due to supply and demand dynamics.

Disinflation

A reduction in the rate of inflation; a slowdown in the rate at which prices increase over time.

Sacrifice Ratio

An economic ratio that measures the effect of rising unemployment on the reduction of inflation within an economy.