Answer to Question #316492 in Microeconomics for Sajida

Question

A. If a firm produce and sells q units of a particular product in the market. The total cost of producing q units is given by the function C(q) = 5q + 350 while the price firm received in the market is given by the function D(q) = 50 - q . Find

a. The profit function

b. The break-even value of q

c. The value of q that result in loss

Answer 1

a) Profit (P) is defined as total revenue (TR) minus Total Cost (TC). Therefore,

$P = TR-TC$

$P =50-q-(5q+350)$

$=50+350-q-5q$

Thus;

$P = 400-6q$

b) The breakeven point is when revenue equals cost or when the profit is zero. Therefore, break even point at value q;

$0=400-6q$

$-400=-6q$

$q=66.67$

The break even value is 66.67 units of q.

c) loss is made when the revenue from sales is not enough to cover all the costs of production.

Therefore;

$50-q=-5q+350$

$50-350=-5q+q$

$-300=-4q$

q=75