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Determine Whether the Following Perfectly Competitive Firm Should Produce Output

Question 9

Essay

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given:
P = $100
TC = 1,000 + 125Q - .5Q2
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?
Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given: P = $100 TC = 1,000 + 125Q - .5Q<sup>2</sup> 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?

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As MR of $100 is below AVC of $112.5 at ...

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