Business Economic Assignment, SU, Malaysia Using the axes as constructed below, depict marginal revenue and marginal cost curves that would support the conclusion

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.

Question 1B

Is this a short-run equilibrium? Why or why not? Explain.

Question 2A

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).

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Question 2B

Does your graph in Question 2A depict a short-run equilibrium? If so, explain why. If not, explain why not.

Question 3A

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 shut down or keep producing at q = 1000. Graphically indicate the profits on your graph.

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Question 3B

Based on the graph you provided, should the firm produce q = 1000 in the short run or should it shut down, producing q = 0? Why? Please explain.

Answer

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