You Should Do This Problem in Three Steps

question 240

Essay

You should do this problem in three steps. First: Fill in Table 1. Assume fixed cost is $1000 and price is $575.
Table 1:
Table 2:
Second: Draw a graph of the firm's demand, marginal revenue, average variable cost, average total cost, and marginal cost curves on a piece of graph paper. Be sure to label the graph correctly. On the graph, indicate the break-even and shutdown points and the firm's short-run and long-run supply curves. Third: Calculate total profit in the space below, then answer questions a through d.
(a) The minimum price the firm will accept in the short run is $_______. (b) The minimum price the firm will accept in the long run is $_______. (c) The output at which the firm will maximize profits is ______. (d) The output at which the firm will operate most efficiently is _______.

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Definitions:

Unpaid Bills

Liabilities or debts that have been invoiced but not yet settled or paid.

Common Stumbling Blocks

Frequent obstacles or problems that hinder progress in a process or project.

Entrepreneurs

Individuals who innovate, create, manage, and lead a business venture, taking on financial risks in the hope of profit.

Run Out of Money

A situation where an individual or organization depletes their financial resources completely, rendering them unable to meet their financial obligations.