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You've researched and found that most firms in the market currently experience costs such that TC=260+75Q4Q2+0.082Q3.
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You've researched and found that most firms in the market currently experience costs such that TC=260+75Q−4Q2+0.082Q3. Determine whether or not you should enter this market.
a. Competitive firms maximize profits when P is above MC but is less than ATC; since I am not producing output where this occurs, then it would not be profitable to enter.
b. Plugging the market equilibrium quantity into this total cost function results in huge costs for my firm, so I should not enter.
c. Using the P=MC rule, the equilibrium price is below ATC at the best quantity, so entering would result in a loss. I should not enter.
d. Where the current equilibrium P=AVC, that price is greater than the marginal cost so I would be profitable upon entering.
