Question

Maryam Inc. produces leather bound books. The market is highly competitive, with books currently selling for R600. Maryam’s total and marginal cost curves are: TC = 3 000 + 100Q2 MC = 200Q Calculate Maryam Inc.’s profit maximising quantity. Is the firm earning a profit? / Mary

Answer 1

$TR=600Q$

$MR=600$

$MC=200Q$

To find profit maximizing quantity:

$MR=MC$

$600=200Q$

$Q=3$

Profit maximizing quantity=3.

$TC=3000+100Q^2$

$TC=3000+100(3^2)=3900$

$TR=600Q=600\times3=1800$

$Profit/loss=TR-TC$

$=1800-3900=-2100$

Thus, the firm is making a loss.