Determine Whether the Following Perfectly Competitive Firm Should Produce Output

Essay

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given:
P = MR = $100
TC = 1,000 + 125Q - .5Q²
SMC = 125 - Q
Where Q = units produced per month
If the firm does not operate, it will lose its $1,000 of fixed costs. What profit or loss will the firm have if it operates where MR = SMC? Does this profit or loss check with your decision on whether to produce or temporarily shut down?