Suppose a firm in a perfectly compectitive market faces following cost functions: AVC = 8000/Q+70 +.25...

Suppose a firm in a perfectly compectitive market faces following cost functions:

AVC = 8000/Q+70 +.25 Q

TC = 8000+70 Q +.25 Q2

The firm faces a market price if Rs 295 with this information calculate the following.

a. Firm's profit maximizing output level?

b. Will firm operate in short run or will shut down temporarily?

c. In real-world situations,monopoiles do face losses or below normal profits. Identify one such real world example of companies/firms and state the reason for below normal profit for each case?

Solutions

Expert Solution

Govt is facing loss in electricity distribution because of high cost incurred and less revenue.

Sometimes due to political reasons govt provides free electricity or exempt payment of bill which will also cause loss.

Rahul Sunny answered 1 year ago

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