1. Shepherd Inc, operates in a perfectly competitive industry. The product Shepherd wants to produce has a fixed cost of $12,000 and the following total variable cost: TVC(Q) = 4((216)3 + 200 (Q+2) for O. > 3.4 Assume company can produce any amount above 3.4 units. Shepherd purchased the equipment for $12,000 and did not start production yet. The current market price is $400. a) (5 points) Calculate Shepherd's profit in the short run. b) (15 points) What should be the market price in the long run for Shepherd to be indifferent between staying in this industry and leaving? What would be the profit at that price? (You do not need to solve this analytically. You can solve it using matlab, mathematica, or excel- trial and error) c) (10 points) Assume that Shepherd is out of the short run, that is, it paid all its costs, collected all its revenue and free to stay in this industry with a new cycle or leave. In addition, Shepherd found itself with $20,000 extra funds (assume it is donated, Shepherd does not have to pay it back and it is only available if Shepherd stays in this industry) that it can use to improve its technology such that, its variable costs will stay the same but fixed cost will be only $1,000. Should Shepherd stay or leave? d) (10 points) An advertisement company approaches Shepherd Inc. and suggests that it should use the funds to advertise rather than to improve the technology? Shepherd turns down this offer. Do you agree or disagree? Why? (No numerical answer is required, you can answer this question verbally in one or two sentences.)