Consider a firm in a perfectly competitive industry. The firm has just built a plant that cost $25,000. Each unit of output requires $5 worth of materials. Each worker costs $5 per hour.
a. Based on the information above.
Where; TFC is total fixed cost
TVC is total variable cost
TC is total cost
MC is marginal cost
AVC is average variable cost
ATC is average total cost.
b. If the market price is $10, how many units of output will the firm produce?
c. At that price, what is the firm's profit or loss? Will the firm continue to produce in short-run? Carefully explain your answer.
d. Graph your results.