A price-taking firm in a competitive industry of a good that is continuously divisible (like sand) has a total cost function TC(Q) = 3.5Q^2 + 100Q + 500. The market price for the good is p = $240. a: Carefully write out this firm’s profit maximization problem, using the particulars of this problem. b: Give the marginal condition (equation) that characterizes the solution to this problem. Solve this condition for the firm’s optimal quantity Q*. c: Calculate the firm’s maximized profit.
A
a: Carefully write out this firm’s profit maximization problem, using the particulars of this
problem.
b: Give the marginal condition (equation) that characterizes the solution to this problem. Solve
this condition for the firm’s optimal quantity Q*.
c: Calculate the firm’s maximized profit.
d: On a graph with quantity on the horizontal axis, neatly plot the marginal revenue curve and
marginal cost curve. Show Q* on your graph.
e: Label areas on your graph using a, b, c, etc. and indicate the areas that correspond to total
revenue and variable cost.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
