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Suppose that a perfectly competitive firm has the following total variable cost (TVC):
Quantity: 0 1 2 3 4 5 6
TVC: $0 $6 $11 $15 $18 $22 $28
It also has fixed costs of $6. If the market price is $5 per unit:
a. Find the firm's profit maximizing quantity using the marginal revenue and marginal cost approach.
b. Check your result by re-solving the problem using the total revenue and total cost approach. Is the firm earning a positive profit, suffering a loss, or breaking even?
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