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QUESTION
A perfectly competitive firm has variable costs given by VC=q^2 and fixed costs of FC=$1. Calculate output and profits if the price were P=$4.
A perfectly competitive firm has variable costs given by VC=q^2 and fixed costs of FC=$1. Calculate output and profits if the price were P=$4. Explain whether this firm should shutdown if price falls to P=$1. Provide a labelled diagram for MC, ATC, AFC and AVC.
