Question

A firm operates in a perfectly competitive industry. Suppose it has a short run total cost function given by TC= 10000 +0.04q2 . If the market price is 56, the firm's profit-maximizing quantity is? __________

Answer 1

700

Step-by-step explanation:

The condition for maximizing profits is Marginal cost = Price.

1. We need to calculate the marginal cost, which is the first derivative of the total cost function.

• marginal cost = (TC=10000+0.04q2=) '

• MC=0.08q

2. Now, we equalize the MC to the price and solve for q.

0.08q=56

q=56/0.08

q=700