Consider a firm with the following total variable costs (TVC).
Q TVC Q TVC
0 0 4 38
1 5 5 55
2 13 6 75
3 24
The firm also has annualized fixed costs associated with its equipment of $30, but the annualized resale value of the equipment is $20. The market price of the good produced is $15.
(a) If the firm has already purchased the equipment, answer the following: (i) if the firm chooses to operate, what is its best possible output? (Hint: find MC and use marginal analysis.); (ii) Should the firm operate? Show your work and explain.
(b) If the firm has not yet purchased the equipment, should it do so? Explain.