Suppose that a competitive firm’s marginal cost of producing output q is given by MC(q) = 3 + 2q. Assume that the market price of the firm’s product is $9.
a. What level of output will the firm produce?
b. What is the firm’s producer surplus?
c. Suppose that the average variable cost of the firm is given by AVC(q) = 3 + q. Suppose that the
firm’s fixed costs are known to be $3. Will the firm be earning a positive, negative, or zero profit in the short run?

Question

Suppose that a competitive firm’s marginal cost of producing output q is given by MC(q) = 3 + 2q. Assume that the market price of the firm’s product is $9.
a. What level of output will the firm produce?
b. What is the firm’s producer surplus?
c. Suppose that the average variable cost of the firm is given by AVC(q) = 3 + q. Suppose that the
firm’s fixed costs are known to be $3. Will the firm be earning a positive, negative, or zero profit in the short run?