Tulip growing is a perfectly competitive industry and all growers have the same

Question

Tulip growing is a perfectly competitive industry and all growers have the same costs. The market price of tulips is $9 a bunch and each grower maximizes profit by producing 2,300 bunches a week. Average total cost of producing tulips is $11 a bunch and average variable cost is $5 a bunch. Minimum average variable cost is $1 a bunch Calculate each grower's economic profit or loss in the short run. I of $L a week. In the short run, each grower is >>> If the firm incurs an economic loss, select loss in the dropdown window and do not enter a minus sign

Explanation / Answer

Answer

profit=(P-ATC)*Q
=(9-11)*2300
=-4600
Tulip growing is incurring an economic loss of $4600
Also, the firm does not shut down because the firm AVC<P

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