Question: Consider a perfectly competitive firm with the following short-run cost functions.

Assume that the market price is $1.50.

a. Will the firm produce output or shut down? Why?

b. If the firm will produce output, approximately how many units will the firm produce?

c. Approximately how much profit/loss will the firm earn/incur?

d. In the figure above, draw the firm's demand curve.

Now, assume that the market price is $0.70.

e. Will the firm produce output or shut down? Why?

f. If the firm will produce output, approximately how many units will the firm produce?

g. Approximately how much profit/loss will the firm earn/incur?

Now, assume that the market price is $2.60.

h. Will the firm produce output or shut down? Why?

i. If the firm will produce output, approximately how many units will the firm produce?

j. Approximately how much profit/loss will the firm earn/incur?