A firm consists of a short-run total costs given by C(q) = 100 + 2q + q2 (therefore, MC = 2 + 2q).
Q1. Find out the average total cost and average variable cost as the function of level of output.
Q2. If P = 25, how much will the firm generate in the short run? What if P = 20?
Q3. Supposing the firm has the similar cost curves in the long-run for q > 0 and C (0) = 0, how much will it generate in the long-run?
Q4. Given your answer in (3), do you think a price of $25 will be probable in the long-run? describe why clearly.
Q5. The government requires a fixed tax of $20 on the profits of the firm. Would this tax influence the decisions of the firm in the short-run and long-run? Describe clearly.