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    Calculating profit maximizing supply level from a retailer

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    The Los Angeles retail market for unleaded gasoline is fiercely price competitive. Consider the situation faced by a typical gasoline retailer when the local market price for unleaded gasoline is $2.50 per gallon and total cost (TC) and marginal cost (MC) relations are:

    TC = $156,250 + $2.25Q + $0.0000001Q2

    MC = dTC/dQ = $2.25 + $0.0000002Q

    and Q is gallons of gasoline. Total costs include a normal profit.

    A. Using the firm's marginal cost curve, calculate the profit-maximizing long-run supply from a typical retailer
    B. Calculate the average total cost curve for a typical gasoline retailer.

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    https://brainmass.com/economics/price-levels/calculating-profit-maximizing-supply-level-from-a-retailer-363076

    Solution Preview

    A. Using the firm's marginal cost curve, calculate the profit-maximizing long-run supply from a typical retailer

    MC=2.25+0.0000002Q
    Price=P=$2.50
    For ...

    Solution Summary

    Solution describes the steps to calculate profit maximizing long run supply from a typical retailer. It also calculates total average cost at this level.

    $2.19