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Produce or shut down in the short run?

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A) At a product price of $56, will this firm produce in the short-run? If it is preferable to produce, what will be the profit-maximizing or loss-minimizing out? What economic profit or loss will the firm realize per unit of output?
B) Answer the questions of 4a assuming product price is $41.
C) Answer the question of 4a assuming product price is $32
D) In the table below, complete the short-run supply schedule for the firm (column 1 and 2) and indicate the profit or loss incurred at each out (column 3).

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Solution Summary

This solution shows how to determine whether a firm will choose to produce or shut down in the short run. Then, assuming the firm to be typical of all the firms in the industry, the solution shows how to determine the industry's supply schedule.

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Short run costs/variable and total revenue

7) Each of the following situations could exist for a firm in the short run. In each case, indicate whether the firm should produce in the short run or shut down in the short run, or whether additional information is needed to determine what it should do in the short run.

a) a. Total cost exceeds total revenue at all output levels.

b) b. Total variable cost exceeds total revenue at all output levels.

c) Total revenue exceeds total fixed cost at all output levels.

d) d. Marginal revenue exceeds marginal cost at the current output level.

e) Price exceeds average total cost at all output levels.

f) Average variable cost exceeds price at all output levels.

g) Average total cost exceeds price at all output levels.

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