Question 5 (Firm Supply) The average cost function of a firm

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Question 5 (Firm Supply) The average cost function of a firm is given by:

AC(y) = 4,000/y + 30y

The price per unit is $600.

a) What are the fixed costs, variable costs, and total costs?

b) What is the marginal cost?

c) How many units will the firm produce if it decides to produce? What will the firm’s profits be if it decides to produce?

d) Should the firm shut down in the short run? Should the firm exit in the long run? Briefly explain.

e) What are the minimum price where the firm would decide to operate in the short run and the long run?

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