Question

Suppose you are the manager of a watchmaking firm operating in a competitive market. Your cost of production is given by C = 100+ 0 + 2q? where q is the level of output and C is total cost. (The marginal cost of production, MC(q), is 4q; the fixed cost, FC, is $100). If the price of a watch is $80, how many watches should you produce to maximize profits? You should produce watches. (Enter your response as an integer.)

Answer 1

In perfect competitive market, The profit maximization quantity is defined at the quantity where marginal revenue equals to marginal cost.

Also, in perfect competitive market, MR equals to AR equals to price.

And in the given, MR = MC

80 = 4Q

So, Q = 20 answer.