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1. Suppose in a perfectly competitive industry the market demand and supply forces combine to produce a short-run equilibrium price of Rs 70. Suppose that a firm in this industry has a weekly total cost function expressed by the equation TC = 200 + 25Q - 6Q2 + 1/3Q3. Determine the perfectly competitive firm's profit maximizing output rate and the amount of its short-run profits or losses.
2. A competitive firm's total revenue is Rs 100, its total cost is Rs 120 and its total fixed cost is Rs 40. Should the firm stay in business? Why?
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