Changes

10.  What is the firm's profit or loss when Q=0 in the honors discussion above?  (Answer simply in terms of another cost measure.)  Is the firm profitable?   

10.  What is the firm's profit or loss when Q=0 in the honors discussion above?  (Answer simply in terms of another cost measure.)  Is the firm profitable?   

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:When Q=0 then the the firm's total cost (TC) is equal to its fixed cost (FC).  The firm that shuts down is losing less money than if it stayed open and produced more Q, but the firm is still losing money.  How much money does a firm that shuts down lost?  Its total cost is equal its fixed cost: the firm has a loss of FC.

11.  (Challenging, with extra credit)  Prove mathematically that MC>MR for all Q>0 in the honors discussion above.  (Hint:  define MC in terms of the change in AVC, and then regroup the terms and draw conclusions about them to show MC>MR).

11.  (Challenging, with extra credit)  Prove mathematically that MC>MR for all Q>0 in the honors discussion above.  (Hint:  define MC in terms of the change in AVC, and then regroup the terms and draw conclusions about them to show MC>MR).

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