You are a price taker in the pineapple industry, and your decision horizon is two years. There is no Fixed cost. Your total variable cost each year is TV C(Q) = 9+Q2, and the marginal cost is MC(Q) = 2Q. In the First year, the market price for pineapples is 4, so you will lose money if you stay in business. You can choose to quit, but if you quit, you cannot reenter the market in the second year. If you decide to stay and move on to the second year, the market price could go up to 10 (with probability 50%), or stay the same (with probability 50%). Again, in the second year, after you see the market price, you can decide whether to stay or to quit. (a) True or False, and why. Whether you should quit in the First year depends on whether the First year market price is below the lowest point of AVC. (b) What is your optimal dynamic plan in this two year decision? Corroborate your decision with calculation. 7