Let a perfectly competitive firm's short-run total cost function be; C(p) = 100q - 4q2 +...

Let a perfectly competitive firm's short-run total cost function be;

C(p) = 100q - 4q² + 0.2q³ + 450

a) Find the Marginal Cost (MC), Variable Cost (VC) and Average Variable Cost (AVC)?

b) Suppose the Market Price is P = $100, what would be the profit-maximizing quantity?

c) Now suppose Average Total Cost (ATC) = $116 at the profit-maximizing quantity. Is this firm making a loss, profit or breakeven?

d) Should the firm shut down or continue to produce? Explain in detail.

Expert Solution

Rahul Sunny answered 2 years ago

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