Suppose you are the manager of an Agriculture company that sells “commodities” in a perfect competition market. Your firm’s total cost function is TC = 20Q2 − 480Q + 1724. Unfortunately, due to Covid 19 pandemic, you must set the production output without knowing for certain the price that will prevail in the market. However, there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600. a.    Calculate the expected market price. b.    What output should you produce in order to maximize expected profits? c.    What are your expected profits?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Suppose you are the manager of an Agriculture company that sells “commodities” in a perfect competition market. Your firm’s total cost function is TC = 20Q2 − 480Q + 1724. Unfortunately, due to Covid 19 pandemic, you must set the production output without knowing for certain the price that will prevail in the market. However, there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600.

a.    Calculate the expected market price.
b.    What output should you produce in order to maximize expected profits?
c.    What are your expected profits?

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