Shortrun Costs for Levys Jeans

1
Short-run Costs for Levys Jeans
? Find profit maximizing output Pick Q where MR
MC 34 34 At Q 6
jeans
Assume the Levy Jeans has the cost curves given
below. Assume that the market price of jeans is
34 per jean. Levy Jeans finds his profit
maximizing quantity, where MR MC. Now he needs
to calculate his total profit. To calculate
profitability he compares the price with average
total cost (ATC TC/Q). Profit TR TC P(Q)
ATC(Q) (P ATC)Q
? Find cost per unit at Q At Q 6 jeans, ATC
24/jeans
?Calculate profit Profit (P ATC) Q
(34 - 24)6 (10)6 60/day
Marginal Revenue Marginal Cost
MC
Q
TC
ATC
MC
?Profit (P ATC) Q (34 24) 6
60/day Area of shaded rectangle
0 1 2 3 4 5 6 7 8 9 10
50 60 65 75 92 114 144 182 240 315 410
--- 60.00 32.50 25.00 23.00 22.80 24.00 26.00 30.
00 35.00 41.00
10 5 10 17 22 30 38 58 75 95
?
ATC
34
MR P
24
?
Quantity of Jeans/day
Q