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4. (25 pts) Consider three firms out of a competitive industry. They have the following technologies: Cl (y) = уг +4, C2(y) = уг + y 4, and C3(y)-уг + 2y + 4 respectively. (a) For each firm derive the marginal cost function MC(), average variable cost function AVC(y), and average cost function AC (y). Show these curves on three graphs, one for each firm. (6 pts) (b) Suppose that in the short-run the market price is p -5. Calculate each firms profit. (6 pts) (c) Show each firms profit on your graphs. (6 pts) (d) Write the shutdown condition and explain (in one sentence) why it will be rea sonable for a firm to produce zero output. (3 pts) (e) Should all of these firms produce in the short-run? Explain. (4 pts)

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An ivent ha t (a) The mavginal Cost Cunction 1 89 C3 vaviable cost iS total Cost lessthe fixedcos The averg e Cost would be as belo b) he Fivm would odwheve the mavgino Coseaua to the pvIC cost pvoducSuit wolud be ci (y)l0-s dollavollav J AC CIAC 0- S 2 Firm O Cレ AVCLLO SS 2- hutaowo Point oc a m is atwhere the fivm of incur its variable cost .uhich in this casr is where the Fim would pvoduce 2evo aut put twould be reasonable .IF the price is Solow that the production Can not take placeanl Can hot it would be wise to produte wo unifs So as to minimi2e loss -X

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