Determine Whether the Following Perfectly Competitive Firm Should Produce Output

question 36

Essay

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given:
P = MR = $100
TC = 1,000 + 125Q - .5Q²
SMC = 125 - Q
Where Q = units produced per month
If the firm does not operate, it will lose its $1,000 of fixed costs. What profit or loss will the firm have if it operates where MR = SMC? Does this profit or loss check with your decision on whether to produce or temporarily shut down?

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Definitions:

Manipulate

To control or influence something or someone in a deceitful way, often to one's own advantage.

Insensitive

Showing a lack of awareness or regard for the feelings, circumstances, or needs of others; often resulting in actions or words that can cause offense or hurt.

Silly

Exhibiting a lack of wisdom or judgment; foolish or nonsensical behavior often aimed at provoking laughter.

Skating

The action or activity of gliding on skates, which may refer to ice skates, roller skates, or skateboards.