Answer to Question #209472 in Microeconomics for Koroo

Question

LTC= 150Q - 15Q^2 + 0.4Q^2. How much economic rent does the low cost producer earn?

Answer 1

$LTC= 150Q - 15Q^2 + 0.4Q^2$

Long-run price=150

P=MC

$150Q - 30Q + 1.2Q^2\\30Q=1.2Q^2\\Q=25$

At this quantity the long run total cost

$150Q - 15Q^2 + 0.4Q^2=625$

Total revenue$=price×quantity$

$150×25\\=\$ 3,750$

economic rent does the low cost producer earn

=Total revenue-total cost

$=3750-625\\=\$3125$