1

Subject:EconomicsPrice:2.87 Bought7

Share With

1. Profit maximization of a seller in a competitive price-searcher market Consider De Virtuose Cupcake, a cupcake shop in a competitive price-searcher market. The following graph shows its demand curve (Demand), marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC). Assume that the shop is operating in the short run. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity. If the shop is making a profit use the green rectangle (triangle symbols) to shade in the area representing its profit. If the shop is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. > 400 . 3.50 Monopoly Outcome 3.00 250 Profit PRICE (Dollars per cupcake) 200 ATO 1.50 Loss 1.00 050 MC MR Demand 9 o 0.5 3.5 4.0 10 1.5 2.0 25 3.0 QUANTITY (Thousands of cupcakes)
At the profit-maximizing output and price, the shop's profit is equal to S (Hint: Be sure to enter a minus sign if profit is negative.) Given the profit-maximizing choice of output and price, there are equilibrium shops in the industry than there would be in long-run