Suppose a firm’s short-run cost curves were found to be: Total Cost = SRTC = 1 + 2Q + Q2 Marginal Cost = SRMC = 2 + 2Q, Where Q is output. Assume the firm behaves as a price taker and sells its output at P = K8 per unit. (a) If the firm maximizes profits, how much will it produce? (b) What are the marginal, average and total cost at that point? (c) What is the firms’ profit?

Suppose a firm’s short-run cost curves were found to be: Total Cost = SRTC = 1 + 2Q + Q2 Marginal Cost = SRMC = 2 + 2Q, Where Q is output. Assume the firm behaves as a price taker and sells its output at P = K8 per unit. (a) If the firm maximizes profits, how much will it produce? (b) What are the marginal, average and total cost at that point? (c) What is the firms’ profit?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.4P

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

Suppose a firm’s short-run cost curves were found to be:

Total Cost = SRTC = 1 + 2Q + Q2

Marginal Cost = SRMC = 2 + 2Q, Where Q is output.

Assume the firm behaves as a price taker and sells its output at P = K8 per unit.

(a) If the firm maximizes profits, how much will it produce?

(b) What are the marginal, average and total cost at that point?

Definition Definition Total cost of producing a certain quantity of a good, divided by the quantity produced. It is the sum of all costs (fixed and variable) required to produce one unit of output.

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