Question: A consulting company, doing a study for a perfectly competitive industry, has forecast a price of $20 for next year. They have estimated the average variable cost to be:

Total fixed cost will be $6,000 next year.

a. Should the firm produce next year? Show how you make this decision.

b. If your answer to “a” is yes, how much should they produce to maximize profits?

c. What will the firm’s expected profit (loss) be?