Consider a perfectly competitive firm with a short-run total cost function given by TC = q2 + 100where q is the level of output. The short-run marginal cost function is given by MC = 2qIf the price of output is $60, how much output should the firm produce in order to maximize profit?Calculate the firm’s economic profit at this level of outputAssuming that each firm in the industry has an identical cost function, is $60 a long-run equilibrium price for this perfectly competitive industry?

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Answered: Consider a perfectly competitive firm…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a perfectly competitive firm with a short-run total cost function given by

TC = q² + 100

where q is the level of output. The short-run marginal cost function is given by

MC = 2q

If the price of output is $60, how much output should the firm produce in order to maximize profit?
Calculate the firm’s economic profit at this level of output
Assuming that each firm in the industry has an identical cost function, is $60 a long-run equilibrium price for this perfectly competitive industry?

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