Problem
You've been hired by a local company that operates in a perfectly competitive market. Its total cost function is ??(??) = (75/128)??4 + 1,240. The prevailing price in the market is $1,200. This is a short run analysis.
One co-worker is arguing that the firm should shut down, the other is saying to stay open. Who is correct, why are they correct, what should output be, and what will profits be? Use concepts from class, maths, and graphs to support your answer.