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Move to.. X Price & cost ($/unit) ATC $20 MC 18 16 AVC NADOONA Quantity a) Suppose that the market price of hemp is $4
Move to.. X Price & cost ($/unit) ATC $20 MC 18 16 AVC NADOONA Quantity a) Suppose that the market price of hemp is $4 per unit (e.g. $4 per kg). In the graph, outline an area that represents this firm's losses if it produces where MR= MC (1 mark) b) If the firm in (a) instead shuts down and produces zero units, it will lose only its fixed costs. Outline an area that represents this firm's fixed costs. (1 mark) c) Which area is larger: its losses from producing where MR= MC, or its losses from producing zero units of output? What should the firm do? (1 mark)
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