Answer to Question #6663 in Microeconomics for steve

Question

A competitive firm produces output using three fixed factors and one variable factor. The firm’s short-run production function is q = 154x – 5x2, where x is the amount of variable factor used. The price of the output is $2 per unit and the price of the variable factor is $8 per unit. In the short run, how many units of x should the firm use?

Answer 1

Q is max when q'=0, q' = 154 - 10x = 0, x = 15.4, so in the short run the firm
should use 16 units of x.