# What level of output should you produce in the short run? b. What is your profit in the short run? c. What will happen in the long run?

You are a manager in a perfectly competitive market. The market equilibrium price for the good you produce is \$35. Your total cost is ππΆ = 80 + 5π + 30π 2 and marginal cost is ππΆ = 5 + 60π. a. What level of output should you produce in the short run? b. What is your profit in the short run? c. What will happen in the long run? 3. A local tomato farm, firm i, operates in a perfectly competitive market and has total costs of production given by ππΆπ = 500 + 10ππ + 5ππ 2 and marginal cost given by ππΆπ = 10 + 10ππ . The market demand for tomatoes is given by πππΎπ π = 105 β 0.5π. The market demand represents quantity demanded across all buyers. Notice the use of subscript i to distinguish the output of firm i (ππ) from πππΎπ π and the output of other tomato farms operating in this perfectly competitive market. At market equilibrium, πππΎπ π = πππΎπ π  = β ππ π π a. Write the equations showing the farm’s average total cost, average variable cost, and average fixed cost, each as a function of quantity (ππ ). b. What is the break-even price and break-even quantity for this firm in the short run? c. What is the shut-down price and shut-down quantity for this firm in the short run? d. If the market price of the product is \$50, how many units will this firm produce? e. Given a market price of \$50, how many firms are in this market? 4. A monopoly firm faces the following market demand π = 100 β π. The firmβs total cost curve is ππΆ = 10 + 5π and marginal cost is ππΆ = 5. a. What is the profit maximizing price and quantity for this firm? Calculate profit. b. How does your answer change if the firm has to pay a lump-sum tax of \$500? NOTE: A lumpsum tax is like an additional fixed cost. We can express total cost as ππΆ = 10 + π‘ππ₯ + 5π. c. For what lump-sum tax value does the monopolist shut down in the long run?