Question of the Day: Day Eleven

Assume that the market for apples is perfectly competitive in that all apples are the same, and there are a large number of apple selling firms. Assume that this firm is currently producing and selling 25 units. The total cost of producing and selling those 25 units of apple is $12.50, while the total variable cost is $10. Firms in this market have only sunk cost (i.e. no recoverable fixed cost).

Answer the following questions below, based on the information given above.

1) If the price of this good was equal to 75 cents, then would the firm be operating above or below the break even point?

2) If the price of this good falls dramatically, the firm could conceivably relocate at the shut down point. If so, what would be the firm's profits?