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e) Suppose that a competitive firms marginal cost of producing output q is given by MC(q) -3+2q. Assume that the market price of the firms product is $9. i) What level of output will the firm produce? (2p) ii) What is the firms producer surplus? (4p) ii) Suppose that the average variable cost of the firm is given by AVC(g)-3+q. Suppose that the firms fixed costs are known to be $3. Will the firm be earning a positive, negative, or zero profit in the short run? (4p) f. Can a firm have a production function that exhibits increasing returns to scale, constant returns to scale, and decreasing returns to scale as output increases? Discuss
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Answer #1

SeluHơn .from the given inAnmchơn, we have Pcm shoule Sel the morke price eual o morgiral Pricee. $9.00, andbole the marginal cest avve, iange ieel to 6 (9-3)The heighh ob the siangle is 3, whee p-MC l to toial reene min toto cost Total Cest ts equal to total varide cost pus Pred cost Vart fred cests eul1o 3 、Total, Cost C9uall TVC and TFC TC - 8 321

answered by: ANURANJAN SARSAM
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