Answer to Question #161720 in Economics of Enterprise for Tharindu Jayasinghe

Question #161720

A firm has the following revenue and cost functions. TR = 60 Q – Q^2

TC = 1 /2 Q^2 +30Q + 30 Determine the quantity level at which the firm maximizes its total profit. (Hint: use marginal revenue = marginal cost rule)


1
Expert's answer
2021-02-09T07:02:33-0500

By the definition of the marginal revenue:


MR=ddQ(TR)=ddQ(60QQ2)=602Q.MR=\dfrac{d}{dQ}(TR)=\dfrac{d}{dQ}(60Q-Q^2)=60-2Q.

By the definition the marginal cost:


MC=ddQ(TC)=ddQ(0.5Q2+30Q+30)=Q+30.MC=\dfrac{d}{dQ}(TC)=\dfrac{d}{dQ}(0.5Q^2+30Q+30)=Q+30.

The firm maximizes its total profit when MR=MC:


602Q=Q+30,60-2Q=Q+30,3Q=30,3Q=30,Q=10.Q=10.

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