Question

Suppose you are a competitive firm producing computer memory chips. Your production capacity is 1000 units per year. You marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000. What are your profit-maximizing levels of production and profit if the market price is a) $5 per chip, b) $15 per chip, and c) $25 per chip? For case b), explain why production is positive even though profits are negative.