Question

Assume that the total cost of a competitive firm is given by,TC=6Q2-16Q+12, and the total revenue of the firm is given by, TR=2Q²

Then find

A.The firms profit maximization level of output.

B.Profit

C.does the firm generate profit or incur loss at 5 unit of output?

Answer 1

$TC=6Q^2-16Q+12$

MC=12Q-16

$TR=2Q^2$

$P= \frac{TR}{Q}= \frac{2Q^2}{Q}=2Q$

For profit maximization, MC= P

2Q= 12Q-16

Q= 1.6

P= 2(1.6)=3.2

$\Pi= TR- TC$

=2($1.6^2)$ - [$6(1.6^2)-16(1.6)+12]$

5.12-1.76= 3.36

c) At Q=5

$\Pi=$ $2(5^2) -[6(5^2)-16(5)+12]$

= 58

It makes a profit of 58