Consider the problem of a competitive firm which has fixed costs of $1000, semi-fixed-costs of $1000, and variable costs given by q2.
QUESTION: What is the maximum market price at which the firm decides to supply zero?
To find the maximum market price at which the firm decides to supply zero, we need to determine the point at which its total costs equal zero.
Total costs (TC) are the sum of fixed costs (FC), semi-fixed costs (SFC), and variable costs (VC). In this case, FC is $1000, SFC is $1000, and VC is given by q^2, where q is the quantity supplied.
So we have the TC equation: TC = FC + SFC + VC = $1000 + $1000 + q^2
Now, when the firm decides to supply zero, it means that the quantity supplied (q) is zero. Therefore, we can substitute q = 0 into the TC equation:
TC = $1000 + $1000 + (0)^2
= $1000 + $1000
= $2000
Therefore, the total costs are $2000 when the firm supplies zero quantity.
The maximum market price at which the firm decides to supply zero is the price where total costs are equal to zero. In this case, since the total costs are always $2000 regardless of the quantity supplied, there is no market price at which the firm decides to supply zero.