Each of the following describes the situation currently faced by a perfectly competitive firm. In each situation, determine the firm’s profit and whether the firm is maximizing profit. If the firm is not maximizing profit, determine how the firm must respond to increase its profit.
a. P=$5, Q=500, TVC = $1500, AFC = $1, MC=AVC
b. AR = $10, Q=100, TC = $2000, TVC=$1500, MC = $10