Question 5 The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a competitive gadget maker: TC = £250,000 + £10Q + £0.001Q2 ƏTC MC = = £10 + £0.002Q de TR = £60Q where Q is the number of gadgets produced. a) Find the optimal quantity of gadgets that maximises profit. b) Use the information obtained in part (a) to calculate the profit. c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run equilibrium output and price. d) Market price declines to £40. Should the firm continue operating in the market. Explain.
Question 5 The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a competitive gadget maker: TC = £250,000 + £10Q + £0.001Q2 ƏTC MC = = £10 + £0.002Q de TR = £60Q where Q is the number of gadgets produced. a) Find the optimal quantity of gadgets that maximises profit. b) Use the information obtained in part (a) to calculate the profit. c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run equilibrium output and price. d) Market price declines to £40. Should the firm continue operating in the market. Explain.
Chapter23: Profit Maximization
Section: Chapter Questions
Problem 11E
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![Question 5
The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a
competitive gadget maker:
TC = £250,000 + £10Q + £0.001Q²
ƏTC
MC =
= £10 + £0.002Q
de
TR = £60Q
where Q is the number of gadgets produced.
a) Find the optimal quantity of gadgets that maximises profit.
b) Use the information obtained in part (a) to calculate the profit.
c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run
equilibrium output and price.
d) Market price declines to £40. Should the firm continue operating in the market. Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F097aca32-f8ea-4666-b5c8-3101c28f8697%2F77cb2937-6a82-48d2-b9bd-05a2167a38cb%2F67rw8nb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 5
The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a
competitive gadget maker:
TC = £250,000 + £10Q + £0.001Q²
ƏTC
MC =
= £10 + £0.002Q
de
TR = £60Q
where Q is the number of gadgets produced.
a) Find the optimal quantity of gadgets that maximises profit.
b) Use the information obtained in part (a) to calculate the profit.
c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run
equilibrium output and price.
d) Market price declines to £40. Should the firm continue operating in the market. Explain.
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