Problem
Suppose that TC = 500 + 3q^2
Which means that MC = 6q
In this problem do the analysis for a perfectly competitive firm that faces an industry price p = $222 per unit sold.
I. What is the profit-maximizing level of output? Show your work.
II. What is the average total cost at the profit-maximizing level of output? (show your work)
III. What is the firm's profit at the profit-maximizing level of output? (Show your work)
IV. If the firm's profits are positive in part c the industry will begin to adjust (there will be entry). If there are negative profits the industry will begin to adjust (there will be exit)
i. At what price will entry (or exit) stop? (Hint: solve for q to answer this question dATC/dq=-500/q^2 + 3 = 0
ii. What is the market price that will bring output to this point?