Firms in a competitive market can sell as much as they like at a market price...
Firms in a competitive market can sell as much as they like at a market price of $16. The cost function for each firm is TC = 50 + 4Q + 2Q^2 The associated marginal cost function is MC = 4 + 4Q and the point of minimum average cost is Q = 5. Using the profit maximizing rule, find the short-run profit at the profit maximizing quantity.
Homework Answers
Answer
the profit is maximum at MC=P
4+4Q=16
4Q=12
Q=3
P=16
total revenue =P*Q=3*16=$48
total cost =50+4*3+2*3^2=80
Profit =TR-TC=48-80
=-$32
the short-run profit at the profit-maximizing quantity is -$32.
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