Answered: marginal cost is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A competitive firm's cost of producing q units of output is

TC=18+4q+q^2

Its corresponding marginal cost is

MC=4+2q

The firm faces a market price p = $24. Create a spreadsheet with q = 0, 1, 2, …, 15, where the columns are q, TR, TC, TVC, AVC, MC, and profit. Determine the profit-maximizing output for the firm and the corresponding profit. Should the firm produce this level of output or should it shut down? Explain briefly.

Suppose the competitive price declines to p = $12. Repeat the calculations of part a. Should the firm shut down?

Expert Solution

Step 1

The Total revenue depicts the revenue generated by selling all the output. The Total cost depicts the cost generated throughout the production process. It includes both the fixed and variable costs.

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