A firm has a total cost curve TC of TC = 50 + q + 2q2 where q is the quantity of
output, a marginal cost of MC = 10 + 4q, an average total cost of ATC = 50/q + 10 +
2q and an average variable cost of AVC = 10 + 2q.
If the price is $50, which statement is true?
a. The firm makes negative profits in the short run and shuts down.
b. The firm supplies q = 5 units in the short run but would exit in the long run.
c. The firm supplies q = 10 units and the industry is at its long-run equilibrium.
d. *The firm supplies q = 10 in the short run, making economic profits in the
short run; the industry is not at its long -run equilibrium.
e. None of the above
Assume that the demand curve is P= 240 - Q. What is the number of firms in the
industry at the long-run equilibrium?
a. 20
b.* 42
c. 75
d. 10
e. None of the above
