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    Profit Maximizing Point

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    You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's total cost function is C=4Q^2 and marginal cost is MC=8Q. What is your profit-maximizing quantity (Q) and price (P), and what is your firm's economic profit? If you operate a typical firm in this market, what will happen in the long run in the market's Q, P and profits if there is no change in demand for the product? Describe a strategy that you can implement to increase your profits in the short-run?

    2. You are managing a monopoly that faces a demand curve described by P=85-5Q. Total revenue is TR=85Q-5Q^2 (^=squared), and marginal revenue is MR=85-10Q. Your monopoly's total cost function is TC=20+5Q, and marginal cost is MC=5. What are your profit-maximizing quantity (Q) and price (P), and if any, your economic profits? In the short-run, how can you make more profits?

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    Solution Preview

    1. You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's total cost function is C=4Q^2 and marginal cost is MC=8Q. What is your profit-maximizing quantity (Q) and price (P), and what is your firm's economic profit? If you operate a typical firm in this market, what will happen in the long run in the market's Q, P and profits if there is no change in demand for the product? Describe a strategy that you can implement to increase your profits in the short-run?

    C = 4Q^2 and MC=8Q
    In the competitive market, the ...

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