Suppose a firm has the following total cost function: TC = 100 + 4q2. What is the minimum price necessary for the firm to earn profit? Below what price will the firm shut down in the short run?
What will be an ideal response?
AC = 100/q + 4q. This is minimized when dAC/dq = 0, or -100/q2 + 4 = 0. Solving yields q = 5 and AC = 40. Thus a price greater than $40 is required for the firm to earn profit. AVC = 4q and MC = 8q. Since AVC is below MC for all levels of output, AVC will be less than price for all levels of output. The firm will not shut down in the short run.
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Indicate whether the statement is true or false
The __________ the opportunity cost of doing something, the __________ likely a person will do that something
A) lower; less B) lower; more C) higher; more D) higher; less E) b and d
Refer to the accompanying figure. An increase in supply is represented by a shift from:
A. curve B to curve A. B. curve C to curve D. C. curve C to curve B. D. curve A to curve B.
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