Question

Suppose a farmer is a price taker for soybean sales with cost functions given by TC = .1q2 + 2q + 30 MC = 2q + 2 If P= 6, the profit-maximizing level of output is a. 10 b. 20 c. 40 d. 80

Answer 1

Answer:

Option (b) 20

Explanation:

Data provided in the question:

TC = 0.1q² + 2q + 30

MC = 0.2q + 2

P = 6

Farmer is a price taker

Now,

Since, the farmer is the price taker.

Therefore,

the farmer is in perfectly competitive market.

Thus,

MC = MR = P

or

0.2q + 2 = 6

or

0.2q = 6 - 2

or

0.2q = 4

or

q = 20

Hence,

Option (b) 20