A firm selling caps in the perfectly competitive caps industry
Assignment Questions
Question 1
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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?
Question 2
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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