Question: Suppose that the total cost function of a firm that produces good X is given by TC = 0.5q° + 5q + 100 where q is the number of unites of X produced by the firm. 1. If P = $50, then how many units of q shall the firm produce to maximize its profit? 2. If the demand curve for good X is P = 100-q, then how many units of q shall the firm produce to maximize its profit? 3. Suppose that income increases which shifts the demand curve upward. The new demand curve is P = 150-q. How many units of q shall the firm produce to maximize its profit? 4. Compare results in 1 and 2 graphically. Comment on the graph? 5. Compare results in 2 and 3 graphically. Comment on the graph?

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