2.8 Suppose that a firm has a marginal cost function given by MC(q) = q + 1.

a.

What is this irm’s total cost function? Explain why total costs are known only up to a constant of integration, which represents ixed costs.

b.

c.

d.

If a irm is a price (p) taker it will produce that output for which p = MC(q). If the irm follows this proit-maximising rule, how much will it produce when p = 25? If the irm is just breaking even at this price, what are ixed costs?

Determine the proit for this irm if price increases to 30.

Show that, if we assume proit maximisation, then proits can be expressed as a function of the price.