Question
2. Consider a perfectly competitive firm with total costs = + + 2 a) Identify the fixed cost , and the variable cost of this
2. Consider a perfectly competitive firm with total costs
= + + 2
a) Identify the fixed cost , and the variable cost of this firm, (). (Each of them is
just a part of the total cost.)
b) Find the average cost (), and the marginal cost ().
c) Long-run supply. Find the minimum of the () curve, which constitutes the "shut- down price" in a long-run setting. Use this "shut-down price" to describe the firm's long-run supply curve.
d) Evaluate the long-run supply curve at = 10, = 4, and = 2.
e) Short-run supply curve. Use your results from part (a) to find the average variable cost function. Find the minimum of the () curve, which constitutes the "shut- down price" in a short -run setting. Use this "shut-down price" to describe the firm's short-run supply curve.
f) Evaluate the short-run supply curve at = 10, = 4, and = 2.
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