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f. Loss = (P – ATC) x Q
= (28 – 32) x 7
= -$28
g. If the firm’s shuts down, the firm need to pay for fixed cost which is $126
h. The firm should shut down the business, because the product price is lower than the ATC
MC(Q) = 10 + 4Q
a. MC = P
MC(Q) = 10 + 4Q
90 = 10 + 4Q
Q = 20
b. Since the firm in a perfectly competitive market, it should charge the price the same as other
firms which is $90
c. π=PQ−C (Q )
π=( 90 )( 20 )−1050
π=$ 750
d. In the long run, if the business gains profit more firm will enter. Therefore, the prices will fall
and the output need to be reduced and at the profit will end at breakeven point.
a. To maximize profit, firm produce the output at
MR(Q*) = MC(Q*)
Therefore, the firm should produce 7 products
c. Profit = (P – ATC) x Q
= (130 – 110) x 7
= $140
d. If new competitor enters the market, the demand and profit will decrease over time
a. MC = 4Q
MR = a+2BQ
= 300 – (2)(3)(Q)
= 300 – 6Q
4Q = 300 – 6Q
Q = 30
= $210
b. π=PQ−C (Q )
π=(210)(30)−3300
π=$ 3000
1+ E
c. MR=P( )
E
1+ E
120=210( )
E
1+ E
0.57=
E
0.57 E=1+ E
E=−2.326
Demand is elastic
= $150
e. π=PQ−C (Q )
π=(150)(50)
π=$ 7 500
1+ E
f. MR=P( )
E
1+ E
0=150( )
E
1+ E
0=
E
E=−1
Demand is unitary elastic