Consider a perfectly competitive industry with the following information Market
ID: 1202007 • Letter: C
Question
Consider a perfectly competitive industry with the following information Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium)Find the profit maximizing output of each firm Consider a perfectly competitive industry with the following information Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium)
Find the profit maximizing output of each firm Market demand - p=(Q/40) -30 There is an unknown number of firms with identical cost structure given by C=.5(q^2)-10q+200 Each firm is earning zero profits (it is a long run equilibrium)
Find the profit maximizing output of each firm
Explanation / Answer
Market demand P = (Q/40) - 30
cost = 0.5Q2 - 10Q + 200
Revenue = Price X quantity
Revenue = ( Q/40 - 30 ) Q
R = Q2 /40 - 30Q
Marginal revenue = 2Q/40 - 30
cost = 0.5Q2 - 10Q + 200
Marginal cost = Q - 10
Profit is maximized when marginal revenue = marginal cost
2Q/40 - 30 = Q -10
Q - Q/20 = -20
0.95Q = - 20
Q = 21 units .
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