Tom’s T-shirts is a price
taker that has the following costs:

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Question: Tom’s T-shirts is a price taker that has the following costs: Output (t-shirts/hour) Total …
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Output
(t-shirts/hour)

Total cost
($/hour)

0

5

1

20

2

26

3

35

4

46

5

59

       
a.    If t-shirts sell for $7.50 each, what is Tom’s
profit-maximizing output?

       
b.    What is Tom’s shutdown point?

       
c.    Over what price range will Tom leave the
t-shirt industry?

       
d.    Over what price range will other firms with
costs identical to Tom’s enter the industry?

       
e.    What is the price of a t-shirt in the long
run?

Your answers should be
fully justified and all necessary calculations shown
in each case.

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