Problem
Charles owns a local shoe store. He sells shoes at $34 per pair. His total cost curve for the shoe production is given by:
TC = 0.4Q2 + 2Q + 36
1. What are Charles' fixed costs of production?
2. How many pairs of shoes should Charles produce to maximize profits?
3. What is Charles' profit when he's producing the profit-maximizing quantity?
4. Assuming that fixed costs are unavoidable for Charles, determine the price at which Charles' shoe store would shut down in the short run and the price at which Charles would exit the shoe-making business in the long run.
5. On a graph, show the following - the price line, marginal cost curve, average variable cost curve, and average total cost curve. On this graph, show where your short run supply curve is. Explain.