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    Profit maximizing output

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    Suppose a firm is operating under a competitive market conditions and the going price for its product is $260. If the firm's short run Total Variable Cost (TVC) function is

    TVC = 80Q - 6Q2 + 0.2Q3
    Total fixed is cost = $1000

    a. What is the firm's profit maximizing output?

    b. How much profit will the firm make?

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    Solution Preview

    Profit is maximized when marginal cost is the same as marginal revenue. We are given the total cost function, which we can differentiate to find marginal revenue:
    MC= 80 - ...

    Solution Summary

    The expert determines the profit maximizing output. The competitive market conditions are examined.