Question

A competitive firm's cost of production q units of output is C = 18 + 4q...

A competitive firm's cost of production q units of output is C = 18 + 4q + q2 . Its corresponding marginal cost is MC= 4 + 2q.

a. The firm faces a market price p= $48. Create a spreadsheet with q = 0, 1, 2, ... 30, where the columns are q, R, C, VC, AVC, MC, and profit. Determine the profit-maximizing output for the firm and the corresponding profit. Should the firm produce this level of output or should it shut down? Explain



b. Suppose the competitive price declines to p = $36. Repeat the calculations of part a. determine the profit-maximizing output for the firm and corresponding profit. Should the firm shut down?

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