Answer to Question #235450 in Economics for amanuel

Question

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?

Answer 1

$$MC=400-40Q+3Q^2$$

If p=250 the firm will not have profit.

If p=300

$$400-40Q+3Q^2=300$$

$$Q=10$$