The Los Angeles retail market for unleaded gasoline is fiercely price competitive. Consider the situation faced by a typical gasoline retailer when the local market price for unleaded gasoline is $2.50 per gallon and total cost (TC) and marginal cost (MC) relations are:
TC = $156,250 + $2.25Q + $0.0000001Q2
MC = dTC/dQ = $2.25 + $0.0000002Q
and Q is gallons of gasoline. Total costs include a normal profit.
A. Using the firm's marginal cost curve, calculate the profit-maximizing long-run supply from a typical retailer
B. Calculate the average total cost curve for a typical gasoline retailer.