ABC Trading is a small firm importing iPhone screen protectors from China and sell them in Australia via eBay. Given the firm's total cost function:

=$900+$2+$0.01²

where is the number of output.

PartA (2 marks)

Draw Australia's market demand curve and ABC Trading's individual demand curve for the market.[Note: you only need to draw a typical market demand curve and a typical firm's individual demand curve.]

PartB(4 marks)

Calculate the firm's optimal output and profit if the market price is $10.

PartC(2 marks)

There is a rumour saying that Apple Inc. is planning to give out one screen protector for each iPhone the company sells starting from next year. Analysis shows that if the rumour happens to be true the market price for screen protector in Australia will reduce from $10 to $6. Explain how Apple Inc.'s new strategy may reduce the market price for screen protectors.

PartD (2 marks)

Calculate the firm's optimal output and profit in next year if the rumour is true. Assuming the total cost function for ABC Trading will remain the same in next year.

PartE(2 marks)

Suppose there is a 20% chance that the rumour is true and 80% chance that the rumour is false. Assuming ABC Trading makes its production decision after learning the new market price (i.e $6 or $10), calculate its expected profit in next year.

PartF (3 marks)

Suppose Apple Inc. developed a new technology which will make screen protectors completely unnecessary for its next generation of iPhone models. As a result, the iPhone screen protector industry will only last for one more year. If an investor is willing to pay a cost of $400 to buy ABC Trading, is the investor's decision consistent with risk averse, risk loving or risk neutral behaviour? Explain answer.