Consider a widget maker with an average variable cost curve, Business Economics

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Consider a widget maker with an average variable cost curve

Consider a widget maker with an average variable cost curve, AVC = 20 + 4q, and fixed costs of $280. The market price is $100 per widget. (These are very fancy widgets!)

a. What is the firm's total cost function?

b. What is the firm's profit maximizing output level?

c. Is the firm profitable? If so, what are its profits?

Suppose the price of a widget falls to $60.

d. Now what is the firm’s total cost function?

e. What is the firm’s profit maximizing output level?

f. Should the firm stay in business?

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