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A cloth producing firm in a perfectly competitive market has the following short-run total cost function: TC 
= 6000 + 400Q – 20Q2
+ Q3
. If the prevailing market price is birr 250 per unit of cloth, 
A. Should the firm produce at this price in the short-run?
B. If the market price is birr 300 per unit, what will be the profit (loss) of the firm at equilibrium? 
Should the firm continue to produce or not?
C. Calculate the shut-down price of this firm?
D. Graphically derive the supply function of the firm.

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Related questions

Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $10,

  1. The firm should produce 31 units.
  2. The firm will shut down in the short run.
  3. An economic loss will occur.
  4. The firm will earn normal profits.

 

13. A perfectly competitive firm is producing 700 units of output in a market where the price is $50 per unit. At this output, TC= $40,000 and TVC= $30,000. The firm is currently producing a level of output where MC is $20 per unit. This output level maximizes the difference between market price and MC. Using only this information, and assuming this firm wants to maximize total profits, we can conclude that A. В. this fimm should increase output. this firm should decrease output. this fimm is producing the output level that maximizes output. this firm should shut down. D.

11. [3 Marks] Assume no change in the LRATC.? All firms in a perfectly competitive market have access to the same technology and input prices. Production entails a $1000 per period fixed cost. A firm sells 1000 units a price of $10, incurring an average of $8 per unit in variable costs. A. The firm must increase output to increase short-run profits. B. The firm must decrease output to increase short-run profits. C. Assuming this firm is maximizing short run profits, it will produce less in future periods as the market price will decrease in the long run. D. Assuming this firm is maximizing short run profits, it will produce more in future periods as the market price will increase in the long run. E. Assuming this firm is maximizing short run profits, it will continue to produce 1000 units in the long run.

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