ch8_example2 - A competitive firm has the following short...

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A competitive firm has the following short run cost function:    C ( q ) = q 3 - 8 q 2 + 30 q + 5 . a. Find MC, AC, and AVC and sketch them on a graph.   The functions can be calculated as follows: MC = C q = 3 q 2 - 16 q + 30 AC = C q = q 2 - 8 q + 30 + 5 q AVC = VC q = q 2 - 8 q + 30 Graphically,   all   three   cost   functions   are   u-shaped   in   that   cost   declines  initially as q increases, and then cost increases as q increases.   Average  variable cost is below average cost.  Marginal cost will be initially below AVC  and will then increase to hit AVC at its minimum point.  MC will be initially  below AC and will also hit AC at its minimum point. b. At what range of prices will the firm supply zero output? The firm will find it profitable to produce in the short run as long as price is  greater than or equal to average variable cost.  If price is less than average 
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