Questions: 1) 2) nited States) Firm A is a small perfectly-competitive rm. The current market price for the output produced by Firm A is $20 per unit. Firm A borrows the capital it uses for production from a similar company at zero cost, and its total costs are represented by the following function: TC = 0.1q2 + 10q + 50, Firm A's marginal costs by MC = 0.261 + 10. a) How many units should Firm A produce to maximize prot? How much is its prot? Support your answers with calculations. b) If Firm A is suddenly charged $100 per week for the capital it uses, how will this change affect the number of units it produces? How will it affect its prot? Support your answers with calculations. c) If instead of being charged $100 per week for the capital it uses, Firm A is charged $2 per unit of output it produces. This change in costs changes the rm's marginal cost to MC = 0.2q + 12. How will this change affect the number of units it produces? How will it affect its prot? Support your answers with calculations. A local pizza shop has hired a consultant to help it compete with national chains in the area. Because most business is handled by these national chains, the local shop operates as a price taker. Using historical data on costs, the consultant nds that short-run total costs each day are given by STC = 10 + q + 0.1612, where q is daily pizza production. The consultant also reports that short-run marginal costs are given by SM C = 1 + 0.2q. a) What is the price-taking rm's short-run supply function? b) Does this rm have a shutdown price? (That is, what is the lowest price at which the rm will produce pizza?) Support your answers with calculations. c) The pizza consultant calculates the shop's short-run average costs as SAC = 1q0 + 1 + 0.1q, and claims that SAC reaches a minimum when q = 10. How could you verify that this is true (without using calculus)? d) The consultant also claims that any price for pizza below $3 will cause this shop to lose money. Is this true? Support your answers with calculations. El Focus '55\