Question

Supose the perfectly competitve price is given as $46 and the total cost of the firm is given by TC=14X+2X^2, find

A) the prifit maximizing level of output for the firm

B) the profit of the firm

And show its graphical illustrations

Answer 1

a) The profit maximizing level of output of the firm would be at the point where;

$P=MC$

$MC= dTC/dx$

$MC=14+4x$

$P=46$

$46=14+4x$

$32=4x$

$x=8$

b) $Profit=TR-TC$

$TR=P.Q$

$TR=46*8 = 368$

$TC=14(8)+2(8*8) = 112+128 = 240$

$Profit =368 -240 =128$

Therefore Profit is $128.00