Question: 2 based on the following information on the hourly costs...
2. Based on the following information on the hourly costs for April Showers, a perfectly competitive firm that produces umbrellas. Umbrellas sell for $10. Fill out the table below.
Output Total Cost TR Profit MR MC ATC
(per hour)__($ per hour) _______________________________________________
- Find short-run profit-maximizing or loss-minimizing output per hour, Q*.
- Sketch by hand MR, MC, ATC, mark Q*, firm’s profit/loss, and explain whether the firm is making or losing money.
- At what approximate price would this firm break even (have zero profits)?
- How will the firms’ profit maximizing decision change if the market price falls to $5? Find the firm’s Q* and profit / loss at this price.
- Explain what additional information you would need in order to determine whether the firm will stay in business in the short-run at this price.