You are a perfectly competitive firm and P = $5 . Your cost function is: C(Y )= Y2 + Y + 4

a) What are your firm’s variable costs? Fixed costs?

b) Write down your firm’s profit function.

c) Write down the firms first order condition for profit maximization and solve for Y * .

d) Show that at this production point, profit is maximized rather than minimized (sufficient condition is met.)

e) Solve for the profit earned by the firm.

f) Should you produce Y * , or should you shut down and produce nothing? Explain why.