a.Suppose a perfectly competitive firm can produce10000 bushels of corn a year at an output at which marginal revenue is equal to marginal cost. The market price of corn per bushel is $2. The firm's total costs per year are $30000 and fixed costs per year are $15000.Show and explain which of the following is true:In the short run, this firm shoulda) Produce 20000 bushels to try to increase economic profit.b) Produce 10000 bushels of corn because, although they are losing money, they are losing less than if they shut down.c)Shut down.d) Continue producing until the price of corn increases. b.A perfectly competitive firm, with MC=q operates in a market character,zed by the following market demand and supply conditions:Demand: Q=20000-100PSupply: Q=100P How much output does this competitive firm produce to maximize profit? Show your work graphically and algebraically.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a.Suppose a perfectly competitive firm can produce10000 bushels of corn a year at an output at which marginal revenue is equal to marginal cost. The market price of corn per bushel is $2. The firm's total costs per year are $30000 and fixed costs per year are $15000.

Show and explain which of the following is true:

In the short run, this firm should

a) Produce 20000 bushels to try to increase economic profit.
b) Produce 10000 bushels of corn because, although they are losing money, they are losing less than if they shut down.

c)Shut down.

d) Continue producing until the price of corn increases.

b.A perfectly competitive firm, with MC=q operates in a market character,zed by the following market demand and supply conditions:

Demand: Q=20000-100P

Supply: Q=100P

How much output does this competitive firm produce to maximize profit? Show your work graphically and algebraically.

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