Show your work and/or explain all your answers! 1. (8 points) Suppose that Stanley's Strawberry farm has the following short-run cost table (where quantity is measured in thousands of pounds and cost in thousands of dollars). Q TC FC VC MC ATC AVC 10 10 0 15 10 5 5 15 5 N 19 10 4 9.5 4.5 3 24 10 14 5 8 4.67 30 10 20 6 7.5 5 37 10 27 7 7.4 5.4 Complete this table. 2. (20 points) Suppose the market price of strawberries is $6 per pound, Stanley's cost is as given in question #1, and assume that he operates in a perfectly competitive market. a. What is Stanley's profit maximizing quantity? What is his profit at that level of output? b. In the short run, should Stanley shut down or continue to operate? C. How do you know that Stanley is not in long-run equilibrium? All else equal, should we expect the price to rise, fall or stay the same in the near future in this market? |