# Here Is The Example I Am Stuck On My Problem Is The One With P1=\$54

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AutoSave ON ~ 3 6 . 5 5 7 w StrebelHW4 – Saving…
Q
Q v
lt; gt; E
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I did all my calculations correctly but I am so stuck on how to even graph any of this 🙁
5 . On the graph below show the firm’s profit maximizing output rate of 128 units plus the areas of total costs, total
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revenues and profits given the ongoing market price of P1 = \$54 per unit. In addition, indicate the condition, in
which firm will be losing money and the situation that will force it to shut down. Finally mark the break-even and
shut-down points. Please use the lines, text boxes and arrows created on or below the graph to answer this question.
(8 points)
Total Revenue area:
MC
ATC
Total Cost area:
Profit area:
AVC
Shutdown point is the one where the price falls so low that the firm is unable to cover even the variable cost.
Firms make loses when the price is below ATC but it continues its operations as long as it is able to cover the variable costs i.e
AVC
Explanation:
Since there is nothing given regarding the long run or short run, I am assuming the market is in the short run and the given price
P1 = \$54 is greater than minimum ATC so that the firm is able to make some economic profits
UC
ATC
AVC
P= SULA
– P -MR= D
– AFC
Q*=128
AFC
P1
D
Quantity
P = MR
Q2
Total Revenue Area : as ( AOEB)
PM
QBE
QSp
DML
PML = MR ML
Total Cost Area : an. (DOE C )
P SD
DSD
Profit Area : as ( ABCD ) [ shaded
MR SD
Losses : At any price between P2 and P3 (as indicated in the graph), the firm will be losing money since price is below ATC.
Shutdown point : As the price falls below P3, the firm has no option but to shutdown since it is not able to even cover the
variable cost.
StrebelHW4.docx
Point F denotes the break even point whereas point G denotes the shutdown point.
PS : Sorry but I didn’t get the notations and lines given below clearly so couldn’t use all of them.
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