Suppose than any given individual firm in a perfectly competitive industry has the following: TC = q^2+315, ATC = q+315/q, MC = 2q.
a.) Using a market price of $42, what is the short-run profit or loss earned by a typical firm in this industry at this market price? Hint: You'll have to first find what quantity (q) the individual firm would want to produce at this price, and then find the profit or loss at that quantity. Remember that big Q is for the whole industry, but little q is for an individual firm. Show work.
b.) Draw a graph showing this single firm and its profit or loss. You'll have to include the firm's ATC and MC curves. In addition, you'll have to show the price, quantity chosen by the firm, and the costs of production at that output level. Label everything clearly. Show the profit or loss as well.