Question

A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm’s total costs are C(Q) = 60 + 12Q + 2Q2.
a. How much output should the firm produce in the short run?
____ units
b. What price should the firm charge in the short run?
$ ____
c. What are the firm’s short-run profits?
$____

Answer 1

Answer:

A) Q=17

B) $80

C) 518

Explanation:

C(Q) = 60 + 12Q + 2Q2

and its MC = 12+ 4Q

a.How much output should the firm produce in the short run?

Put P = MC and solve for Q

P＝MC

80=12+4Q

4Q=68

Divide both sides of the equation by 4

Q=17

b.What price should the firm charge in the short-run? $80

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

Hint:

Profit=Total Revenue-Total CostTotal Revenue=$80x17=1360

TotalCost=60+12x17+2(17)2=60+204+578=842

Profit=1360-842=518