1. Suppose that Linda's Strawberry farm has the following short-run cost table (where quantity is measured in pounds).

Q	TC	FC	VC	MC	ATC	AVC
0		10,000		----	----	----
1000			5000
2000	19,000
3000				5
4000					7.5
5000						5.4

a. What is the total cost of producing zero strawberries?

b. What is the variable cost of producing 2000 strawberries?

c. What is the average total cost of producing 3000 strawberries?

d. What is the marginal cost of producing 4000 strawberries?

e. What is the variable cost of producing 5000 strawberries?

f. If Linda is experiencing economies of scale, what can we say about the slope of her long-run average total cost curve? Why might Linda be experiencing economies of scale?

2. Suppose the market price of strawberries is $6 per pound, Linda's cost are as given in question #1, and assume that she operates in a perfectly competitive market.

a. What is Linda's profit maximizing quantity (in thousands)? What is her profit at that level of output?

b. In the short-run, should Linda shut down or continue to operate?

c. How do you know that Linda is not in long-run equilibrium? Note that there are two possible answers.

d. In the long-run, should Linda shut down or continue to operate? Based on your answers to question #1, is there any way Linda can become more profitable in the long-run?