Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 29

Use the theory of short-run supply illustrated in Figure to answer the following questions:
1. How will an increase in the fixed costs that Burger King must pay to heat its outlets affect the firm's short-run supply curve for Whoppers?
2. How will a $10,000 fine imposed on Burger King for littering by its customers affect the firm's short-run shutdown decision? Would your answer change if the fine were $1,000 per day, to be ended once the littering stopped?
Figure Short- Run Supply Curve for a Price- Taking Firm
The firm maximizes short-run profits by producing that output for which P= SMC. For P 1 (P 1 = minimum short-run average variable cost), the firm chooses to shut down (q = 0). The short-run supply curve is given by the heavy colored lines in the figure.