What is the shutdown price for this firm

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Reference no: EM131108663

Assume that a price-taking firm in the wheat industry has typical U-shaped SAC and AVC shortrun cost curves and an upward sloping SMC curve. Assume that the minimum SAC is $30 at 225 units of output, and assume that the minimum AVC is at $18 at 120 units of output.

a. Draw a diagram including the short-run MC, SAC, and AVC curves for this firm.

b. What is the shutdown price for this firm? Explain your answer.

c. Assume the market price is $23. Will the firm produce positive or zero output? If the firm produces a positive level of output (q* > 0), illustrate the level of profits (or losses) in your graph. (Without the explicit cost functions, you cannot give a numerical profit value. I am looking for a graph of the profits (or losses).)

d. Describe the short-run supply curve for this firm.

Reference no: EM131108663

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