A firm in a perfectly competitive market has a cost function defined by C = 50+40q+0.5q^2. (Hint: Given this cost function, Marginal Cost = = 40 + q.) Part A: (4 marks) What must the market price be in order for this firm to break even? Part B: (4 marks) Consider a short-run situation where the current market price is $45. (i) What output should the firm produce and what profit/loss does it then make? (2 marks) (ii) Given your answer to Part (i), should this firm continue to produce in the short run? (2 marks)
