You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q2. Your firm's maximum profits are
a. 36
b. 40
c. 60
d. 80
"C=60+4Q^2"
"P=" $"40"
Optimal price: $40.
Optimal output:
"MR=P=40"
"MC=8Q"
To get optimal output:
"MR=MC"
"40=8Q"
"Q=5"
Maximum profit:
"=TR-TC"
"=PQ-(60+4Q^2)"
"=(40\\times5)-[60+4(5^2)]"
"=40."
The firm's maximum profits are: $40.
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