suboptimal output
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The short-run marginal cost of the Ohio Bag company is 2Q. Price is $100. The company operates in a competitive industry. Currently, the company is producing 40 units per period. What is the optimal short-run output? Calculate the profits that Ohio Bag is losing through suboptimal output.
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Solution Summary
Calculate the profits that Ohio Bag is losing through suboptimal output.
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In the short-run, competitive market, profit is maximized when
MC (Marginal Cost) = P (price)
hence, 2Q = 100 ==> Q = 50 is ...
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