1. Sarah’s Salmon Farm produced 1,000 fish last week. The marginal cost was $30 a fish, average variable cost was $20 a fish, and the market price was $25 a fish. Did Sarah maximize profit? If Sarah did not maximize profit and if nothing has changed will she increase or decrease the number of fish she produces to maximize her profit this week?

Use the following information to work Problems 2 to 4.

Trout farming is a perfectly competitive industry and all trout farms have the same cost curves. When the market price of a fish is $25, farms maximize profit by producing 200 fish a week. At this output, average total cost is $20 a fish, and average variable cost is $15 a fish. Minimum average variable cost is $12 a fish.

2. If the price of a fish falls to $20, will a farm produce 200 fish a week?

3. If the price of a fish falls to $12, what will the trout farmer do?

4. What are two points on a trout farm’s supply curve?