Problem
The following graph illustrates a perfectly competitive industry and firm operating in a perfectly competitive market. The fixed costs for the firm are $478.80:
Answer the following questions based on the graphs above:
i. What quantity will the firm produce in order to maximize profits? Fully detail and explain why a firm would produce that specific quantity. In addition, why would the firm not produce a lower quantity or higher quantity.
ii. What is the exact economic profit for the firm at the profit maximizing quantity.
iii. Explain why the firm chooses to operate, given their current economic profit. Explain when the firm would choose to shut down?