Total variable costs, Consider a firm with the following

Total variable costs

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Reference no: EM13861950

Consider a firm with the following total variable costs (TVC).

Q TVC Q TVC

0 0 4 38

1 5 5 55

2 13 6 75

3 24

The firm also has annualized fixed costs associated with its equipment of $30, but the annualized resale value of the equipment is $20. The market price of the good produced is $15.

(a) If the firm has already purchased the equipment, answer the following: (i) if the firm chooses to operate, what is its best possible output? (Hint: find MC and use marginal analysis.); (ii) Should the firm operate? Show your work and explain.

(b) If the firm has not yet purchased the equipment, should it do so? Explain.

Reference no: EM13861950

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