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Suppose that the marginal cost of producing output, q, in the short-run for a competitive firm is MC = 10 + 8q. The market price of the firm's product is $25.

a. (2 pts) What level of output will the firm produce to maximize its profits?

b. (3 pts) Assume that the firm's fixed costs are $5, and the firm's average variable cost is given by AVC = 10 + 4q. What are the short-run total costs at the level of output the firm produces?

c. (3 pts) What are the profits in the short-run? d. (10 pts) Show the level of profits in a graph.

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Retselisitsoe Pokothoane
Retselisitsoe PokothoaneLv10
28 Sep 2019

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Related questions

Suppose that a competitive firm's marginal cost of producing output q is given by MC (q) = 3 + 2q. Assume that the market price of the firm’s product is $9. a. What level of output will the firm produce? b. What is the firm’s producer surplus? c. Suppose that the average variable cost of the firm is given by AVC (q) = 3 + q. Suppose that the firm's fixed costs are known to be $3. Will the firm be earning a positive, negative, or zero profit in the short run?

Question:

Evaluate the following statement:

In the short-run, information about a perfectly competitive firm's fixed costs is needed to determine both the profit-maximizing level of output and the amount of profit earned when producing that level of output.

Answer:

The objective of a firm is to maximize profits. In determining output, the firm may be subject to two constraints: costs of production and consumer demand. The price that a perfectly competitive firm may sell its products, is determined by consumer demand. Production costs are determined by the technology used. Profits are the difference between total revenues and total costs. Pertaining to short-run profit maximization, firms maximize profits by choosing the output level where its marginal revenue equals its marginal cost.

Farnham, P. G. (2014). Economics for Managers (3rd Ed.).

I need a peer reply for this, please.

A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm's total costsare C ( Q) = 40 + 8Q +2Q2.

a. How much output should the firmproduce inthe short run?

b. What price should the firm charge in theshort run?

c. What are the firm's short-run profits?

d. What adjustments should be anticipated inthe long run?

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