Question: Mark sells small handmade chairs at a market. There are a lot of other furniture sellers along with him. His total cost function is the following: \(\mathrm{TC}(\mathrm{q})=180+\mathrm{q}+(1 / 20) \mathrm{q}^{2}\)

As you would expect, there's not only a large number of sellers, but also a large number of buyers every Sunday (say). Under these conditions, it is reasonable to assume that he cannot really set the price that he charges. He is a "price taker". Suppose he sells his output at p dollars.

1. What's Mark's Marginal Cost function? What is his Average Cost Function?
2. How much is his fixed cost? How much is his variable cost?
3. At what level of production is his average cost minimum (check the example we saw during lecture)
4. If the price per chair is $8, how many chairs will he make (and sell)? What will be his profit in this case?
5. When he is just able to cover his total costs of production, we say that he is able to just "break even" This is, Total Revenue=Total Cost. If he stays producing the (optimal) number of chairs you found in (d), at what price would he be able to just break even?
6. At what price would he be able to just cover his variable costs? This is called the shutdown price.

Price: $2.99

Solution: The downloadable solution consists of 2 pages
Deliverable: Word Document