Question

Suppose your firm has a marginal revenue given by the equation MR = 10 - Q​, where Q is the quantity produced and sold. This means that the seventh unit of output brings in 10 - 7 = $ 3 of additional revenue. The marginal cost for your firm is given by the equation MC = 2 + Q. This means that the seventh unit of output increases the marginal cost by 2 + 7 = $ 9.

If the firm produces the seventh unit of output, marginal cost will be marginal revenue. In which of the following cases, will the profit of the firm be maximized?

(A) When the marginal cost of producing an additional unit equals the marginal revenue from that unit.
(B) When the average cost of producing an additional unit equals the marginal revenue from that unit.
(C) When the marginal cost of producing an additional unit is less than the marginal revenue from that unit.
(D) When the average cost of producing an additional unit is less than the marginal revenue from that unit. The profit-maximizing level of output is ____ units.

Answer 1

(A) When the marginal cost of producing an additional unit equals the marginal revenue from that unit.

q = 4 maximize the profit

Step-by-step explanation:

The profit-maximizing level is the one at which marginal revenue equals marginal cost, so we will set the eqaution and solve for Q

MR = MC

10 - q = 2 + q

10 - 2 = q + q

8 = 2q = 4

the profit is maximize at q = 4