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Decision making in case of a perfectly competitive firm

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Suppose you are the manager of a perfectly competitive firm whose short run TC=100+160Q+3Q^2. If the current market price is $196.00, which of these options is appropriate?

1)produce 5 units and continue producing
2)produce 6 units and continue producing
3)produce zero units (shut down)
4) not enough information given

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Solution Summary

The solution depicts the calculations needed to make a output decision.

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Solution:

TC=100+160Q+3Q^2
Marginal Cost=MC=d(TC)/Q=160+6Q
A firm maximizes its profits or minimizes its losses by selecting its output level ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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