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Profit maximizing level of output

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1. A profit-maximizing firm operating in a perfectly competitive market can sell products for $100 per unit. The firm has a cost function represented by:
C(Q) = 1000- 160Q + 10QSqr(10 q squared) . The market demand function for this product is Qd = 500 - 3P.

a.What is the profit maximizing output for this company?

b.What is the profit (loss) this firm will make at the profit maximizing level of output?

c.How many firms will compete in this market at the profit maximizing price and quantity? (Assume all firms are identical; i.e., have the same cost function and fact the same price.

d.In the long run, what will be the profit-maximizing price and quantity in this market?

e.What is the profit maximizing quantity in the long run and what will the level of economic profit be for each of these N identical firms?

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Solution Summary

The profit maximizing level of output, the number of firms that will compete in the market at the profit maximizing price and quantity, the profit-maximizing price and quantity in the long run etc. are calculated.

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Managerial Economics

Output FC VC TC TR Profit/Loss
0 100 0
1 100 100
2 100 180
3 100 300
4 100 440
5 100 600
6 100 780

A. Complete the table
B. At what output rate does the firm maximize proft or minimize loss?
C. What is the firm's marginal revenue at each positive level of output? its average revenue?
D. What can we say about the relationship between marginal revenue and marginal cost for output rates below the profit-maximizing for loss-minimizing rate? For output rates above the profit-maximizing or loss-minimizing rate?

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