1. A competitive firm has the daily short-run costs given below with short run fixed cost = $1. a. Using the chart below, what is the firm's most profitable output and how large are profits (loss) if(a) the price is $.18? (b) $.23? (c) .43? (Hint: what is marginal revenue with a competitive firm?) Assuming the firm has signed a contract and must pay the fixed cost, should this firm close down at any of the prices? Should the firm renew the contract in the long run at any of the prices? Explain. b. If the government levied a $.10 tax on each unit sold, how would that change the optimal output, the profits (loss) and the shutdown decisions? What if instead, the government imposed a daily fee of $1.00 if the firm operates, independent of the number of units sold, would this change the optimal output? What about the shutdown decision? units produced variable cost average variable cost marginal cost 425 425 .500 250 075 625 208 125 800 200 175 1.025 205 225 1.300 217 .275 1.625 232 325 2.000 250 .375 9 2.425 269 425 10 2,900 290 475