Now switch perspective to the firm's cost side assuming the same technology: y = 2????1 .5????2 .5 .

a. Again assuming, in the short-run, x2 is fixed at 1 unit, derive the equations and graph of the firm's short-run cost curves: Total Cost (C(y)), ATC, AVC, and MC. Derivation:

Graph:

b.If the firm again faces an output price of 1, use the MR=MC rule to compute the firm's profit maximizing output level.

c. Compare the solution (y*) form the profit maximizing approach in question 3 to the solution using the MR = MC rule in question 4.

d. What is the firm's supply curve?

e. What is the firm's shut down price?

f. Suppose there are Z firms in this market. Write the equation for market supply.

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