Question

For the cost and price functions below, find a) the number, q, of units that produces maximum profit; b) the price, p, per unit that produc C(q)=90+18q;p=78−2q a) The number, q, of units that produces maximum profit is q= s maximum profit; b) the price, p, per unit that produces maximum profit; and c) the maximum profit, P.

Answer 1

To determine the quantity of units that produces maximum profit, compare the total revenue and total cost curves. The firm experiences losses below 30 units and increasing losses above 100 units. The maximum profit occurs between 70 and 80 units, amounting to $90.

Step-by-step explanation:

To find the number of units that produce maximum profit, we need to determine the quantity at which total revenue exceeds total cost by the largest amount. This can be done by comparing the total revenue and total cost curves. At Q = 60 units, for example, the total revenue (TR) is 240 and the total cost (TC) is 165. The difference between TR and TC, which is the height of the profit curve, is 75 at this output level. The firm doesn't make a profit at every level of output but experiences losses between 0 to approximately 30 units and increasing losses beyond 100 units. The maximum profit occurs at an output between 70 and 80 units, where the profit equals $90.