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Business, 11.04.2020 00:57 orlando19882000

Suppose Lea owns a profit maximizing firm that produces a generic form of aspirin. Assume that the market for aspirin is perfectly competitive and all firms are identical. Her fixed costs are $7 per month. Her variable costs per month are given in the following table:

(For Simplicity, assume Lea can only produce in whole units each month)
Quantity Variable Cost Total Cost AVC ATC S
O 8 15 8.00 15.00 18 5.50 9.00 22 5.00 7.33 21 28 5.25 7.00 29 36 5.80 7.20 39 46 6.50 7.67

Suppose that, in the short-run, the market price for aspirin is $6.50 per unit. How many units would Lea produce and how much profit will she earn each month? At a price of $6.50, would Lea choose to operate her firm in the short-run or would she shutdown? Briefly explain. (2 points)

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