Question :

(a) Suppose Firm A is a perfectly competitive firm producing good X and faces the following average revenue and average cost

Average Revenue: P = 10
Average Cost: AC = 4 + 0.6 Q

(i) Find the total cost and marginal cost function

(ii) Calculate the profit maximisation output level and the resulting profit/ loss.

(iii) Calculate market output and market price

(iv) If market demand shift to D = 420 - 2P and Firm A faces an average cost given by AC = 2 + 0.8Q what is the profit maximisation output level and resulting profit /loss for Firm A if AC is unchanged?

(v) What is the resulting output if we were in a LR situation?