1. You have just been employed by a firm that is operating under a “perfectly competitive”...

1. You have just been employed by a firm that is operating under a “perfectly competitive” environment and also with the following relevant market information: --

Current market price per unit is $15 (NOTE: this is also the firm’s marginal revenue, MR)

TC = 0.5Q2

MC = Q

a) Using profit maximizing quantity level at 15, what is the firm’s TR?

b ) What is the firm’s TC using the same profit maximizing quantity level as a above?

c. What is the firm’s total profit?

3. Given the following information and formulas of a firm operating under a “monopolistically competitive” environment:

TC = 3Q3 - 18Q2 +30Q + 50, in which TC is sum of TVC and TFC

TVC = 3Q3 - 18Q2 + 30Q ; TFC = 50

MC = 9Q2 – 36Q + 30

AVC = TVC / Q

a. In the space below, compute quantity Q2 (HINT: To compute Q2, you will need to mathematically equate MC and AVC together and then solve for Q).

b. Compute P2 which is the lowest price below which the company must shut-down.

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Expert Solution

Rahul Sunny answered 1 month ago

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