Consider a profit - maximizing firm producing a differentiated product in a competitive market. The firm faces a fixed cost of $40,000 and its additional costs is described by the following equations: MC = 20 + 0.01Q and AVC = 20 + 0.005Q. Currently, the demand for the firm's product is described by the following equations: P = 80 - 0.015Q and MR = 80 - 0.03Q.

PART A - What is the firm's profit at its current level of output?

PART B - What can be said about the current market environment, and what long-run adjustments (if any) should be anticipated?

FILL IN THE BLANK

Given that the firm's economic profit is BLANK zero, we can conclude that the market BLANK in long-run equilibrium. As a result, one should anticipate BLANK as the market BLANK long-run equilibrium. Specifically, the number of firms in the market BLANK and the firm's BLANK curve BLANK.

CHOICES -

adjustments

demand

equal to

greater than

is

is not

less than

marginal cost

moves towards the

no adiustments

remains in

will decrease

will increase

will not change

PART C - Consider that as the market adjusts, the firm decides to increase its operations from four days per week to six days per week. What can be said about the current market environment in the long run?

In the long run, the demand for the firm's product is described by the following equations: BLANK The firm's fixed cost will be BLANK and the firm's additional costs is described by the following equations BLANK.

CHOICES-

P = 70 - 0.015Q and MR = 70 - 0.03Q

P = 80 - 0.015Q and MR = 80 - 0.03Q

P = 90 - 0.015Q and MR = 90 - 0.03Q

$30,000

$40.000

$50,000

MC = 18 + 0.01Q and AVC = 18 + 0.005Q

MC = 20 + 0.01Q and AVC = 20 + 0.005Q

MC = 22 + 0.01Q and AVC = 22 + 0.005Q

PART D - Consider that as the market adjusts, the firm decides to increase its operations from four days per week to six days per week. What is the firm's current output?

PART E - What is the firm's profit at its current level of output?