Calculating optimal amount of input (X)
Assume ZCorp has the following short run production function:
Q = 50X - 2X^2
where X is the only variable input used by ZCorp to product its product, Q.
Because ZCorp sells its product in a perfectly competitive market, it can sell all the Q it produces for $25. The current market price for input X is $100.
How many units of X will ZCorp buy?
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Solution Preview
Q = 50X - 2X^2
Marginal Product of X=MPx=dQ/dX=50-4X
Marginal Revenue Product ...
Solution Summary
Solution calculates the optimal number of units that ZCorp will buy.
$2.19