Question 2. Suppose you are a consultant for a perfectly competitive firm seeking an assessment of its policies in the short run. What would you recommend in terms of quantity changes (raise, cut, shut down, or stay put) and price changes (raise, cut, or stay put) in each of the following situations (a through e):

a. [5 points] P = $210; MC = $205; AVC = $206.

b. [5 points] P = $210, MC = $210, AVC= $206.

e. [5 points] P = $210, MC = $210, AVC = $211.

d. [5 points] P = $210; MC = $205; AVC = $212.

e. [5 points] P = $ 210, MC = $212, AVC = $206.

[Notations/Abbreviations: P = price; AVC = average variable cost;MC = marginal cost]

PART-II.

Question 1. Suppose you are a consultant for a natural monopolist seeking an assessment of its policies in the short run. What would you recommend in terms of quantity changes (raise, cut, shut down, or stay put) and price changes (raise, cut, or stay put) in each of the following situations (a through e):

a. [5 points] MR = $298; MC = $348; AVC = $288

b. [5 points] MR = $148; MC = $98; AVC = $138

c. [5 points] P = $269; MC = $319; AVC = $289

d. [5 points] MR = $150; MC = $100; AVC = $140

e. [5 points] MR = $288; MC = $338; AVC = $278