Consider a competitive firm with a TC = 50 + 2q 2 + q.If price is $17, which statement is true?

The firm sets marginal cost (MC) equal to price to maximize profit. MC = d(TC)/dq = 4q + 1. Setting MC = 17 gives q = 4. At q = 4, total cost is 82, total revenue is 68, resulting in a loss. Thus, the firm will exit in the long run.

Consider a competitive firm with a TC = 50 + 2q 2 + q.If price is $17, which statement is true?

The firm sets marginal cost (MC) equal to price to maximize profit. MC = d(TC)/dq = 4q + 1. Setting MC = 17 gives q = 4. At q = 4, total cost is 82, total revenue is 68, resulting in a loss. Thus, the firm will exit in the long run.

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Consider a Competitive Firm with a TC = 50

Question 4

Multiple Choice

Consider a competitive firm with a TC = 50 + 2q² + q.If price is $17, which statement is true?

A) The firm produces 4 units of output in the short run and is making an economic loss; the firm will exit the industry in the long run.
B) The firm produces 8.5 units of output and this is the long-run equilibrium.
C) The firm produces 4 units of output, and is making a positive economic profit; this is the long-run equilibrium.
D) The firm produces 4 units of output, and is making a zero economic profit; this is the long-run equilibrium.
E) The firm shuts down in the short run and produces zero output; the firm will leave the industry in the long run.

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