Consider the supply decisions of a firm with SR cost function
C(q) = 1200 +(1/25)q^4
(a) Write out equations for marginal cost (MC), average total cost (ATC), and average variable cost (AVC), and show these on a properly-labeled graph.
(b) What is the lowest possible ATC? At what level of production (q) does the lowest ATC occur?
(c) What is the lowest possible AVC? At what level of production (q) does the lowest AVC occur?
(d) At P = 250, calculate how much this firm will supply in the short run by equating price marginal cost and solving for quantity q. Will the firm make a profit, a loss, or neither? (If a profit or a loss, calculate its size.) Show this point on the graph of the average and marginal cost curves, and indicate the area corresponding to the firm's profit or loss.
(e) Write down the equation for the firm's short-run supply function in the form q(P): i.e., for every price, the quantity that the firm will supply as a function of the market price.