Question

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily...

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given:

P = $350

TC = 3,250 + 100Q + 2Q2

where,

Q is units produced per month

If the firm does not operate, it will lose its $3,250 of fixed costs. What profit or loss will the firm have if it operates where MR = SMC? Does this profit or loss check with your decision on whether to produce or temporarily shut down.

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