Explore BrainMass
Share

Explore BrainMass

    Calculating optimal output levels

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Syracuse Paper supplies printer paper in upstate New York. Like the output of other wholesale distributors, Syracuse Paper must meet strict guidelines and the printer paper supply industry can be regarded as perfectly competitive. Total and marginal cost relations are:

    TC = $3,600 + $5Q + $0.01Q2
    MC = dTC/ dQ = $5 + $0.02Q

    where Q is cases of printer paper per day.

    A. Calculate the firm's optimal output and profits if prices are stable at $20 per case.
    B. Calculate optimal output and profits if prices rise to $25 per case.
    C. If Syracuse Paper is typical of firms in the industry, calculate the firm's equilibrium output, price, and profit levels.

    © BrainMass Inc. brainmass.com October 10, 2019, 2:34 am ad1c9bdddf
    https://brainmass.com/economics/general-equilibrium/calculating-optimal-output-levels-383788

    Solution Preview

    A. Calculate the firm's optimal output and profits if prices are stable at $20 per case.

    Perfectly competitive firm sets its output such that MC=Price to maximize its profits.
    Put MC=Price=$20
    20= 5 + 0.02Q
    0.02Q=15
    Q=750

    Total Revenue=P*Q=20*750=$15000
    Total ...

    Solution Summary

    Solution describes the steps to calculate optimal output levels and associated profits at the given price levels.

    $2.19