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Assume a perfectly competitive market. Your company's cost for each quan- tity is shown as below. How many would you produce if the market price

Assume a perfectly competitive market. Your company's cost for each quan-

tity is shown as below. How many would you produce if the market price

is 28? Answer this by comparing the prots with and without production.

quantity total cost

0 50

1 100

2 128

3 148

4 162

2. Assume a perfectly competitive market. Let the your rm's xed cost is

10 and the market price is 3. When you produce 3, the marginal and the

variable costs are 3 and 6, respectively. How much will you produce in order

to maximize the prot or minimize the loss?

(Use this for questions 3 and 4) Let Q denote the quantity of pizza. A

pizza producer has variable cost (VC) and xed cost (FC) as

V C = Q2

FC = 4:

3. Assume a perfectly competitive market. What happens if the market price

is $3? Decide whether to produce or not. If you produce, how many? For

your decision, how much is the prot or loss?

4. Assume a monopoly. Along with the VC and FC given above, you find that

the market demand function is

P = - Q + 40:

How much will you produce and how much will you charge in order to

maximize your prot? Find the amount of profit.

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