Question
Consider a competitive firm with the short-run cost function C(q) = 20 + 6q + 5q2 The firm faces a market price of p for
Consider a competitive firm with the short-run cost function
C(q) = 20 + 6q + 5q2
The firm faces a market price of p for its output.
a. Suppose the price of the firm's output is p = $26. What is the profit made by the firm? Will it stay in business in the short run? Provide appropriate reasons.
b. Suppose the price of the firm's output is p = $18. What is the profit made by the firm? Will it stay in business in the short run? Provide appropriate reasons.
c. Suppose the price of the firm's output is p = $18. Draw a welllabeled graph that shows the amount of the profit or loss. Make sure that in your graph you shade the amount of profit or loss, and include the ATC, AVC and MC curves.
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Auditing Cases An Active Learning Approach
Authors: Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt
2nd Edition
0130674842, 978-0130674845
