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:

Normally Distributed

A type of distribution depicted by a bell-shaped curve, where most of the observations cluster around the central peak and the probabilities for values further away from the mean taper off equally in both directions.

Standard Normal Distribution

A standard normal distribution characterized by a zero mean and a standard deviation of one, utilized in the analysis of statistics.

Symmetrically Distributed

A distribution where the values of variables show symmetry around the mean.

Gestation Time

The duration of time between conception and birth in animals, including humans.