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Finding optimal output level

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Firm PQR produces a product 'Alpha' under perfect competition market conditions. The cost function for the firm is:
TC = 1500 + 200Q + Q^2

The market supply and demand equations for the product 'Alpha' in the perfect competition market are:
QS = 40,000 + 60 P
QD = 80,000- 40 P

Based on the information given above, calculate:

1. The profit maximizing output for PQR.
2. The economic profits earned by PQR.
3. Is the industry for product 'Alpha' in equilibrium?

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Solution Summary

Solution describes the steps to find out profit maximizing output and economic profits of a perfectly competitive firm.

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1. The profit maximizing output for PQR.

For equilibrium, Put Qs=QD

Each firm is a price taker in perfectly competitive environment. So, PQR will also sell its output at ...

Solution provided by:
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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