Question
Consider a perfectly competitive firm with total costs: TC = a + bq + cq^2 a) Identify the fixed cost FC, and the variable cost
Consider a perfectly competitive firm with total costs: TC = a + bq + cq^2
a) Identify the fixed cost FC, and the variable cost of this firm, VC(q). (Each of them is just a part of the total cost)
b) Find the average cost AC(q), and the marginal cost MC(q).
c) Long-run supply. Find the minimum of the AC(q) 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 a =10, b=4 and c=2.
e)Short-run supply curve. Use your result from part (a) to find the average variable cost function. Find the minimum of the AVC(q) 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 a=10, b=4 and c= 2.
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