Question: 4) (10 pts) Suppose that ACME Inc. is a firm that produces slingshots and that the market for slingshots is perfectly competitive. Let the total cost function for producing slingshots be defined by: ( C(q)=72 4 q ) ( 2 q^{2} ), where ( q ) is the quantity produced. Correspondingly, the marginal cost function is ( M C(q)=4 4 q ). Based on currentShow transcribed image textIntroduction C = 72 4Q 2Q^2 MC = 4 4Q Explanation…View the full answerTranscribed image text: 4) (10 pts) Suppose that ACME Inc. is a firm that produces slingshots and that the market for slingshots is perfectly competitive. Let the total cost function for producing slingshots be defined by: C(q)=72 4q 2q2, where q is the quantity produced. Correspondingly, the marginal cost function is MC(q)=4 4q. Based on current market supply and demand, the equilibrium price is $16/ slingshot. i) Calculate the profit-maximizing choice of output (q) for ACME Inc. ii) What is ACME Inc.’s total profit given this choice of q? iii) Given your answer to ii), should ACME Inc. continue to produce slingshots in the short-run?
