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.