the graph to the right depicts the per unit cost curves and demand curve facing a shirt manufacturer in a competitive industry 2

Question

2 years ago

8

.9

1 answer:

natulia [17] · Answer 1 · 2023-06-19T18:26:31+03:00

The firm will exit or leave the industry as its not making any profits.

<h3><u>CALCULATION OF THE PROFITS</u></h3>

According to the Question,

The firm produces at P = MC

Where we know,

Q = 55 units

P = $4.78

ATC or Average Total Cost = 6.76

AVC or Average Valuable Cost = 3

P > AVC so the firm produces to minimize losses at the MC = P.

Profit = ( P - ATC ) × Q

=( 4.78 - 6.76 ) × 55

= - 108.9

The profit is - 108.9 dollars per minute.

As the firm in the industry is making losses ( a negative profit ) so it will exit the industry in the long run.

To know more about competitive firms, check the given link.

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