1) Explain why the P = MC rule is the same as the MR = MC rule for perfectly competitive firms.

2) Suppose a firm operating in a Perfectly Competitive market has a cost function of,

TC = 1200 + 4Q + 0.02Q²

Q = Output

If the unit price of the good is $20,

a.How many units of the product should the firm sell, to maximize profit?

b.Calculate the profit at the profit maximizing output.

c.What is the likely outcome in the long run? Explain.

iii.Determine the level of output (non-zero) at which the following cost functions are minimized & the levels of those costs;

i.AC =200 - 24Q + Q²

ii. MC = 200 - 48Q + 3Q²