Question: 5. 6. (15 marks) Consider a rm whose total cost function is q3 W + 13:]. a. If the price of a unit of output

5. 6. (15 marks) Consider a rm whose total cost function is q3 W + 13:]. a. If the price of a unit of output is $13, what is the profit-maximizing value of q? b. Find the average cost function of the firm? What is the firm's minimum average cost? c. What is the equilibrium price of output? How much does each firm produce at equilibrium price? What is each firm's prot at the equilibrium price? (15 marks) In 2003, Saudi Arabia and Venezuela produced an average of8 million and 3 million barrels of oil a day, respectively. Production costs were about $10 a barrel and the price of oil averaged $28 per barrel. Each country had the capacity to produce an additional 1 million barrels per day. At that time, it was estimated that each country 1-million-barrel increase in supply would depress the average price of oil by $3. Copy the following Table on your answer sheet: Venezuela 3 M barrels 4 M barrels 8 M barrels Saudi Arabia 9 M barrels Answer the following questions: a. Fill in the missing prot entries in the payoff Table. b. What action should each country take and why? c. Does the asymmetry in the countries' sizes cause them to take different attitudes towards expanding out? Explain why or why not

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