Total Costs for a firm are given by: TC=3Q2+11

Firms will produce at the minimum efficient scale, i.e., where average total cost is equal to the marginal cost. Average total cost is

ATC=TC/Q=3Q+11.8/QATC=TC/Q=3Q+11.8/Q

Marginal cost is total cost differentiated with respect to quantity, i.e.,

• MC=6QMC=6Q

The minimum efficient scale is:

• 3Q+11.8/Q=6Q11.8/Q=3QQ=23Q+11.8/Q=6Q11.8/Q=3QQ=2

A firm will exit if price is less than average total cost. At Q = 2, average total cost is:

• 3∗2+11.8/2=11.93∗2+11.8/2=11.9

Hence, the firm will exit if price falls below $11.9.