1. Assume the firm faces an output price of $110. How many units of output does firm produce
2. Consider that average total cost is minimized at 10 units of output, what would we expect to occur to industry in long run. What will be output of firm in long run and why
In a perfectly competitive market, for profit maximization level:
MC = Price
Thus for maximizing profits:
100+2Q = 110
Solving for Q we get:
2Q = 110 - 100
=> Q = 10/2
=> Q = 5
Does for ...
The solution explains the microeconomic concept of profit maximization using the scenario in the question.