What is her economic profit at the shut-down point

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Reference no: EM131047975

Quantity(gallons per day) Total cost(dollars per day) 0 400100 703200 880300 1,008400 1,160500 1,410600 1,840
Petunia's Farm produces and sells milk. The market for milk is perfectly competitive. The market price of milk is $2.50 per gallon.

The relationship between the farm's output and total costs is shown in the table above.

a) Draw Petunia's average variable, average total, and marginal cost curves.

b) Use your graphs to find Petunia's profit-maximizing output.

c) If Petunia maximizes her profit, how much profit does she make?

d) What is Petunia's shutdown point? What is her economic profit at the shut-down point?

e) Should Petunia shut down? Will farms with costs the same as Petunia's enter or exit the milk market? Explain.

Reference no: EM131047975

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