You've researched and found that most firms in the market currently experiencecosts such that TC = 1,325 + 3800 - 6.7502 + 0.0703. Determine whether ornot you should enter this market.Select one:Oa. Plugging the market equilibrium quantity into the firm total cost functionresults in huge costs for my company, so I should not enter until P > MC.b. Using the P==MC rule, the equilibrium price is below ATC at the optimalquantity, so entering would result in a loss. I should not enter.O c. The optimal Q is set where AVC and ATC intersect which occurs farabove the equilibrium price, so entering would result in profits and thus Ishould enter.O d. The total revenue at the equilibrium P is greater than the total costs, so itwould be profitable to enter.

a. Plugging the market equilibrium quantity into the firm total cost function results in huge costs…

Answered: You've researched and found that most…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.6IP

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PakPerfect Inc. estimates equation of its total costs of production as TC = 500 + 10Q + 5Q2 and market demand for its product as Qd = 105 – (1/2) P, where Q is quantity in units and P is price in Pak$. a- Write the equations of the firm’s costs, as a function of Q: Average Total Cost ATC Average Variable Cost AVC Average Fixed Cost AFC b- Given above costs can you determine what will be the firm’s production in Stage 1? c- What is the breakeven price and breakeven quantity for this firm?

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