Question: A perfectly competitive firm has the following cost curves:

TC = 400 + Q² so that MC = 2Q.

a. Determine the corresponding AC and AVC for this firm and graph each (on the same graph) with the MC. [Hint: the AC-curve for this case is U-shaped. To determine the output level at which AC is at a minimum, set AC = MC and solve for Q.] (3 points)

b. If the market price for the good is 80, determine and illustrate this firm’s equilibrium output, markup, and profit levels. (3 points)

c. Determine the market price above which this firm will earn positive economic profits. Explain your answer. (1 point)

d. Show and explain why this particular firm should not shut down in the short-run as long as the market price for its product is positive. (2 points)

e. Assuming that the current market price is 80, what will happen in this industry in the long-run? Why? (2 points)