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Costs Analysis

Use the following equations to demonstrate why a firm producing at the output level where MR = MC will also be able to maximize its total profit (i.e., be at the point where marginal profit is equal to zero). Note: To prove this, you must first present the algebraic expression for the profit function, and then the first-order condition to verify your answer.

P = 170 - 5Q

TC = 40 + 50Q + 5Q2

Solution Preview

P = 170 - 5Q

TC = 40 + 50Q + 5Q2

The firm's total profit function is
π = P Q - TC
π = (170 - 5Q )Q - (40 + 50Q + ...

Solution Summary

The marginal revenue is examined.

$2.19