BUECO5903 Business Economics - Microeconomics Assignment

Question 8:

The following diagram shows the cost curves of a firm under perfect competition.

(a) How much will the firm produce in order to maximise profits at a price of $8 per unit? .......................(1/2 mark)
(b) What will be its average cost of production at this output?.............(1/2 marks)
(c) How much (supernormal) profit will it make? ........................................(2 marks)
(d) How much will the firm produce in order to maximise profits at a price of $5 per unit? ........................(1/2 mark)
(e) How much (supernormal) profit will it make? .............................(2 marks)
(f) How much will the firm produce in order to maximize profits at a price of $4 per unit?   (1/2 mark)
(g) What will be its profit value be now? ................................................(2 marks)
(h) Below what price would the firm shut down in the short run? .............................(1 mark)
(i) Below what price would the firm shut down in the long run? ..............................(1 mark)