QUESTION 20

The U.S. strawberry jam industry is perfectly competitive and all firms have the cost structure:

• TFC = $11,375per year
• TVC =0.01q²
• MC= 0.02q

whereqis the number of cases of jam produced by a typical firm in a year. The market price is $5 per case.

Answer the following questions:

• What is the profit-maximizing quantity sold? Enter a number.
• What is theaverage totalcostat this profit-maximizing quantity? Enter a number.
• Would you advise the firm to shut-down in the short run? Enter yes or no.