A firm has a linear demand function for its product. When the price of the product is Sh.220, the quantity demanded is 40 units. When the price increases to Sh.240, the quantity demanded becomes 30 units. In addition, the firm’s marginal cost function is given by: MC = 40q – 2q2 + 2 Fixed cost = Sh.5 million Where q = quantity demanded, MC = marginal cost (Sh. million) Evaluate the level of output that maximizes profits.
A firm has a linear demand function for its product. When the price of the product is Sh.220, the quantity demanded is 40 units. When the price increases to Sh.240, the quantity demanded becomes 30 units. In addition, the firm’s marginal cost function is given by: MC = 40q – 2q2 + 2 Fixed cost = Sh.5 million Where q = quantity demanded, MC = marginal cost (Sh. million) Evaluate the level of output that maximizes profits.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 19PAE
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A firm has a linear demand function for its product. When the price of the product is
Sh.220, the quantity demanded is 40 units. When the price increases to Sh.240, the
quantity demanded becomes 30 units. In addition, the firm’s marginal cost function is
given by:
MC = 40q – 2q2 + 2
Fixed cost = Sh.5 million
Where q = quantity demanded, MC = marginal cost (Sh. million)
Evaluate the level of output that maximizes profits.
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