The Green Company produces a chemical in a perfectly competitive market. The current market price is $40; the firm’s total cost function is C = 100…
3. The Green Company produces a chemical in a perfectly competitive market. The current market price is $40; the firm’s total cost function is C = 100 + 4Q + Q2
(MC = 4 + 2Q).
a) Determine the firm’s profit maximizing output.
b) Complying with more stringent environmental regulations increases the firm’s fixed cost from 100 to 144. Would this affect the firm’s output?
c) How would the increase in fixed costs affect the market’s long-run equilibrium price? The number of firms? (Assume that Green’s costs are typical in the market.)
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