How will profit-maximizing output of y change

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Reference no: EM133319084

Case: The graph below displays the short-run average variable cost (AVC), the short-run average total cost (ATC), and the marginal cost (MC) curves of a company Y which produces a homogenous product in a perfectly competitive industry. The vertical axis shows cost while horizontal axis shows the level of output. Suppose that the equilibrium price is equal to $30.

Question (i) Using the graph above, find the profit-maximizing output of Y in the short-run and marginal revenue at this output.

Question (ii) Using the graph above, find the total fixed cost of Y . What is the average fixed cost when Y produces 40 units of output?

Question (iii) What is the profit of Y in the short-run?

Question (iv) Should Y shut down in the short-run? If so, why? If not, why not?

Question (v) What is the shutdown price for Y ?

Question (vi) If the total fixed cost rises, how will profit-maximizing output of Y change in the short-run? How does an increase in total fixed cost affect the profit of Y?

Reference no: EM133319084

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