Consider a total cost function TC(Q) = 90 + 40Q +1.5Q^2 for a firm in a competitive market. In this question, you will derive some cost functions and curves. And you are expected to plot them (can be done online or hand drawn). B) Derive MC and ATC. Then draw MC and ATC together and examine if MC passes through ATC at the minimum of ATC. C) Compute the fixed cost FC. D) Based on the curves that you plot in Part B, comment on whether this firm will produce anything when the market price is $50. If not, why? If so, how many outputs Q would a profit-maximizing firm produce (roughly)? What if the market price is $85? E) Based on your answer in Part C, what is the lowest variable profit the firm must be able to make in order for the firm to consider entering the market? Why?

Consider a total cost function TC(Q) = 90 + 40Q +1.5Q^2 for a firm in a competitive market. In this question, you will derive some cost functions and curves. And you are expected to plot them (can be done online or hand drawn). B) Derive MC and ATC. Then draw MC and ATC together and examine if MC passes through ATC at the minimum of ATC. C) Compute the fixed cost FC. D) Based on the curves that you plot in Part B, comment on whether this firm will produce anything when the market price is $50. If not, why? If so, how many outputs Q would a profit-maximizing firm produce (roughly)? What if the market price is $85? E) Based on your answer in Part C, what is the lowest variable profit the firm must be able to make in order for the firm to consider entering the market? Why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Step 1: Define competitive market

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Step 2: Derive MC and ATC

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Step 3: Calculate FC

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Step 4: Compute the equilibrium when price is $50.

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Step 5: Calculate the lowest variable profit.

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