Someone opens a dry cleaning business. He hires a business consultant to advise him on how to compete with other businesses in the area. The business operates as a price taker. The business consultant establishes the below to be the short-run total costs each day: STC = 10 + Q + 0.1Q2 1. Find the business’ short-run supply curve? 2. Does the firm have a shutdown price? If so what is the price? 3. The business consultant calculates the short-run average costs = 10/Q + 1 + 0.1Q and claims that SAC reaches a minimum at Q = 10. Is this the case? (Show your working)
Someone opens a dry cleaning business. He hires a business consultant to advise him on how to compete with other businesses in the area. The business operates as a price taker. The business consultant establishes the below to be the short-run total costs each day: STC = 10 + Q + 0.1Q2 1. Find the business’ short-run supply curve? 2. Does the firm have a shutdown price? If so what is the price? 3. The business consultant calculates the short-run average costs = 10/Q + 1 + 0.1Q and claims that SAC reaches a minimum at Q = 10. Is this the case? (Show your working)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Someone opens a dry cleaning business. He hires a business consultant to advise him on how to compete with other businesses in the area. The business operates as a
STC = 10 + Q + 0.1Q2
1. Find the business’ short-run supply curve?
2. Does the firm have a shutdown price? If so what is the price?
3. The business consultant calculates the short-run average costs = 10/Q + 1 + 0.1Q and claims that SAC reaches a minimum at Q = 10. Is this the case? (Show your working)
4. Currently the market price is low at K2 because of promotions by a major business. Because the prevailing price fails to cover average costs the business consultant recommends the business ceases operations until the promotions are over. As an economist, do you agree with these assertions?
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