Question 3

Consider a perfectly competitive market. A competitive firm in this market has the following total cost structure:

Output	Total Cost
0	5$
1	10$
2	12$
3	15$
4	24$
5	40$

suppose that the market price is 10$.

b) If the firm decides to stay in business, determine how many units will be produced and the profit of the firm. c) Should the firm decide to stay in business or is it better for it to shut-down in the short-run? Explain why. d) What is likely to happen to the market price and number of firms in the long- run? e) Determine the shape of MP,, illustrate it on a diagram and explain your answer. [1+4+3+3+3 = 14 marks]