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Production Decisions in the Perfectly Competitive Markets

Berries are produced in a perfectly competitive market. Hack’s Berries faces a short-run total cost of production given by TC = Q3 -12Q2+ 100Q + 1000, where Q is the number of crates of berries produced per day.

a.    If the market price of berries is $127 per crate, how many crates of berries should Hack’s produce? How much profit will Hack’s make? Comment on whether Hack’s will continue to produce this amount in the short-run. Why or why not.

b.    Calculate the market price below which Hack’s berries will not produce any output in the short-run, that is calculate Hack’s Berries shut down price.

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