Question

The Green Company produces chemicals in a perfectly competitive market.The current market price is 40, the firms total cost is C= 100+4Q+Q2.

a.Determine the firms profit maximizing output. More generally, write down the equation for the firms supply curve in terms of price P.

Answer 1

a. The firms profit maximizing output is produced at P = MC. Marginal cost MC is the firms supply curve.

$MC = C'(Q) = 4 + 2Q,$

4 + 2Q = 40,

Q = 18 units.