Perfectly Competitive firm faces a market price of birr 40 and has the following
Cost function: STC = 5800+ 20Q+0.02Q2.
A. What quantity of output is best for this firm in the short-run? Why?
B. Should firm attempt to change some price other than the market price of 40? Why or why not?
A. MC=P
MC=20+0.04Q
40=20+0.04Q
Q=500
B.No, because the ultimate condition for maximizing profit is such a volume of output at which the price is equal to the marginal costs.
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