Answer to Question #325114 in Microeconomics for Axis

Question

A firm has the following demand function 𝑷 = 𝟔𝟎 − 𝟎. 𝟓𝑸 and its total cost are

defined by 𝑻𝑪 = 𝟏𝟑 + 𝑸.

a. Find the maximum revenue.

b. Find the production to optimise the profit.

c. Verify if that the marginal revenue and marginal cost are the same at

the profit maximising production level.

Answer 1

a) Maximum revenue is determined from the equation TR'=0. TR=PQ=(60-0.5Q)Q=60Q-0.5Q²

TR'=60-Q=0; Q=60

b) Optimal profit is determined from the equation MR=MC. MR=TR'=60-Q; MC=TC'=(13+Q)'=1; 60-Q=1; Q=59

c) At Q=59 MR=60-59=1=MC