1. Suppose you are the manager of Sunglass Hut operating in a competitive market. Your cost of production is given by TC = 100 + Q*Q, where Q is the level of output and TC is the total cost. The marginal cost of production is 2Q. The fixed cost of production is $100.
(a). If the price of sunglasses is $60 per pair, how many pairs should you produce to maximize profit?
(b). What will the profit level be?
(c). At what minimum price will you produce a positive output?
2.Suppose that Densa Inc. falls 10 percent short of producing the profit maximizing output. Would a higher product price lead to greater output? Would an increase in input prices lead to a reduction in output?