The short run cost function of a firm is as follows: total cost=200+5Q+2Q^2 :where Q=physical units of the product of the firm. What would be the level of optimum output ?
1
Expert's answer
2017-05-08T08:55:09-0400
N.B. Presumably, this question is about a firm operating in a competitive market, since it contains no information about the impact of the produced units on the market price.
Answer:
A firm's production level reaches its optimum and hence maximizes profit when the firm produces where marginal revenue equals marginal costs, i.e. MR=MC (1) In a competitive market any particular firm is a price-taker and, therefore, MR=P and (1) becomes MC=P.
Calculate marginal cost:
MC = dTC / dQ MC = d(200+5Q+2Q^2) / dQ MC = 5+4Q
Therefore:
MC = P 5 + 4Q = P Q = (P - 5) / 4
where P is the price of a physical unit of the product.
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Assignment Expert
09.04.20, 15:40
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Solly
09.04.20, 05:37
The firms production function is given by Q=700Le^-0.02L, Where Q
denotes the number of units produced and L the number of labourers.
Find the size of the workforce that maximises output
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The firms production function is given by Q=700Le^-0.02L, Where Q denotes the number of units produced and L the number of labourers. Find the size of the workforce that maximises output