The following graph represents the situation of Sindbad’s caps, a firm selling caps in the perfectly competitive caps industry.
1) How much output should Sindbad produce to maximize his profit, if the market price is equal to $11?
2) How much profit (loss) will he earn?
3) Indicate the profit (loss) area on the graph.
4) Suppose Sindbad decides to shut down. What would his loss be?
John produces table lamps in the perfectly competitive desk lamp market.
1) Fill in the missing values in the following table:
2) Suppose the equilibrium price in the desk lamp market is $30. How many table lamps should John produce? How much profit will he make?
3) If next week the equilibrium price of desk lamps drops to $15, should John shut down? Explain.
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