1. A business charges a price of $12 per patron served. Average variable cost is $11 per patron. The business has total fixed cost of $10,000 per month. The business expects to serve 5,000 patrons this month.

A. Calculate this firm's economic profit or economic loss for the month if it produces.

B. Calculate this firm's economic profit or economic loss for the month if it shuts down.

C. Should this firm continue to produce or should it shut down?

2. A firm has the following short run total cost function: TC = (1/3)Q³ - 4Q² +56Q +20.

A. Derive the firm's MC function; its ATC function; and its AVC function.

B. The market price of output is $200. Calculate the firm's profit maximizing output.

C. Calculate ATC. Will the firm will make an economic profit or an economic loss.

D. Calculate AVC. Should this firm produce or should it shut down in the short run?

3. A perfectly competitive firm faces a total cost function of: TC = 1,200 + 0.5Q² . The market demand curve is given by the equation P=300-Q. Answer the following questions as you solve for the perfectly competitive equilibrium in this market (P^e , Q^e ).

i. What condition holds at q*?

ii. How are P and MC related for a perfectly competitive firm?

iii. Using the relationship identified in (ii), Solve for Q^e :

iv. Using the relationship identified in (ii), Solve for P^e :