Q. A competitive firm sells its product at a cost of $0.10 per unit. Its total cost function is:
TC = 5 - 0.5Q + 0.001Q2
(a) Determine the output rate that maximizes profit or minimizes losses in the short run.
(b) If input costs increase as well as cause the cost function to become:
TC = 5 - 0.10Q + 0.002Q2
What will the new equilibrium output rate be? Clarify what happened to the profit maximizing output rate when input costs were increased.