Question: [Short - run operation decision]

In this question we will examine a firm’s decision whether to run a plant or to shut down in the short run. We have learnt the following principle (likely, in the Intermediate Micro class) on this subject.

"Operate when the total revenue exceeds the total variable cost. Shut down when the total revenue is less than total variable cost."

It can be restated as follows:

"Operate when price exceeds average variable cost. Shut down when price is less than average variable cost."

This leads us to following principle.

The shut down price level equals the minimum value of average variable cost.

If the producer’s cost function is

\(C\left( q \right)=0.0015{{q}^{3}}-0.9{{q}^{2}}+200q+60000\)

find the shut down price level.

Price: $2.99

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