2a) Explain the relationship between P > AVC and a firm's contribution margin, when a firms is making a decision to shut down operations.
2b) Knowing that a profit maximizing firm would follow the MR = MC rule and in case of a perfect competitor P = MC rule;
If a perfectly competitive firm has the following cost function: MC = $150 + 0.005Q, calculate a profit maximizing level of output at the market price of $175.
2c) Given that a Monopoly's demand curve is less elastic than that of a perfect competitor, can a monopolist set just any high price and dare comsumers not to buy his/her products? What would be the concequences of such action by a monopolist?
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