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Finding optimal output and price levels

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Please help with the following economics problem. Provide step by step calculations.

You are the manager of a firm that sells its product in a competitive market at a price of 50. Your firms cost structure is c=40 + 5Q2.

The profit maximizing output for your firm is one of the following:

4/5
10
5
45

Suppose a monopolistic knows the own-price elasticity of demand for its product is -3 and its marginal cost of production is constant MC(Q) = 10. To maximize its profits, the monopoly price is

1.50 per unit
6.67 per unit
10.00 per unit
15.00 per unit

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Solution Summary

There are two problems regarding macroeconomics. The solution to the first problem depicts the methodology to find out the profit maximizing output level and the answer to the second problem describes the steps to calculate profit maximizing price. Step by step calculations are given for each.

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You are the manager of a firm that sells its product in a competitive market at a price of 50. Your firms cost structure is c=40 + 5Q2. The profit maximizing output for your ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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