Suppose that for a particular perfectly competitive firm the AVC function is given by: AVC=200-7.5Q +.267Q2 and FC is equal to $250. Suppose also that the current market price equals $140. a. Find the MC curve for this firm. b. Find the profit maximizing output (note: you will need a quadratic equation solver - use Math is Fun quadratic equation solver if you like) but you will need to come up with the quadratic equation in your answer and indicate what a, b and c are equal to, then you are allowed to pick the bigger Q (the smaller Q will not be profit maximizing). You may round the Q you find to the nearest whole number. c. Calculate profits at this level of output.
Suppose that for a particular
AVC=200-7.5Q +.267Q2 and FC is equal to $250. Suppose also that the current market price equals $140.
a. Find the MC curve for this firm.
b. Find the profit maximizing output (note: you will need a quadratic equation solver - use Math is Fun quadratic equation solver if you like) but you will need to come up with the quadratic equation in your answer and indicate what a, b and c are equal to, then you are allowed to pick the bigger Q (the smaller Q will not be profit maximizing). You may round the Q you find to the nearest whole number.
c. Calculate profits at this level of output. d. Should the firm produce at the output you found in part C or should it shut down temporarily? Explain.
e. Now, confirm your answer in part d by finding the unique market price below which the perfectly competitive firm would want to shut down. Explain your answer.
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