Question

 6. Deriving the short-run supply curve

 Consider the competitive market for halogen lamps. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry.

 For each price in the following table, use the graph to determine the number of lamps this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price.

 On the following graph, use the orange points (square symbol) to plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.)

 Suppose there are 7 firms in this industry, each of which has the cost curves previously shown.

 On the following graph, use the orange points (square symbol) to plot points along the portion of the industry's short-run supply curve that corresponds to prices where there is positive output. (Note: You are given more points to plot than you need.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market.

 Note: Dashed drop lines will automatically extend to both axes.

 At the current short-run market price, firms will _______  in the short run. In the long run, _______ .

Answer 1

Price	Quantity	Produce or shut down	Profit or loss
15	0	shut down	loss
20	0	shut down	loss
25	0 or 45000	either shut down or produce	loss
55	60000	produce	Breakeven
70	65000	produce	profit
85	70000	produce	profit

Firm will produce when P≥AVC

Shut down if P

Loss if P

Breakeven if P=ATC

Profit if P>ATC

To find the market supply curve, multiply the quantity by 7 at each price level.

At the current short run market price of $55, firms will produce. In the long run firms will neither enter nor exit as this is the Breakeven level.

If it helps kindly upvote