Answer:
<em>Therefore the output level at which the firm's profit is maximized is = -100.it indicates a loss</em>
Explanation:
<em> Given that,</em>
<em> the firm's profit function,
</em>
<em> (q) = 40q - (110 +20q +10q^2)
</em>
<em>
The Profit is maximised by taking the first formula of the profit function with respect to. q and putting it equal to 0, (first order condition). This gives us,
</em>
<em>
dπ (q)/dq = 40 - 20 - 20q = 0
</em>
<em>
The variable cos of the firm's average is , AVC= 20 +10q. At q=1, AVC= 30.
</em>
<em>
Since AVC is less the price, then the firm will function in the short run.
</em>
<em>
(since TR= 40q and q=1, therefore p=40).
</em>
<em>
It gives q=1
</em>
<em>
At q=1, revenue = 40, total cost= 140, therefore maximum profit = -</em>