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a)
Because the old plant is sunk, the optimal quantity output if the firm continue to use the old plant is when the marginal cost equals the marginal revenue which is a price under a perfectly competitive market. It follows that the firm will choose to produce Q=6 and make a total revenue of 6 × 32 = $192 and it costs $338 to produce Q=6 and makes -$146 profit. Although the firm makes a negative profit, it still covers the part of the fixed cost...

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