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Solution 2.
If Swim N Style is a profit maximiser, as you can see in the table, it should sell 9 suits per hour and should charge $52 per suit which will earn him a profit of $268
1. Draw a table and calculate total revenue, average revenue, marginal revenue, marginal cost, and average cost at each level of sales for the store.
2. If Swim N Style is a profit maximizer, what number of suits will it sell per hour? What will its price and profit be? Show the detailed calculations and explain the reason.
3. How many swimsuits are currently sold in the Santa Barbara market each hour, and what is the total cost incurred? Show the detailed calculations and explain the reason.
4. Identify the sales level at which Swim N Style's average cost would be a minimum. What is this average cost? Show the detailed calculations and explain the reason.
5. How can you tell that the bathing suit market in Santa Barbara is not in long-run equilibrium? Clearly explain the reason. What will happen because it is out of equilibrium?
