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vampirchik [111]
2 years ago
11

You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C =

40 + 5Q2. The profit-maximizing output for your firm is
Business
1 answer:
Marina86 [1]2 years ago
5 0

Answer: Q = 5

Explanation:

In a competitive market, the profit maximising quantity is the quantity at which Marginal Cost is equal to Marginal revenue.

In a competitive market, price is equal to marginal revenue so marginal revenue is $50.

Marginal cost would be the differential of the cost function;

= 40 + 5Q²

= (2 * 5) * Q

= 10Q

10Q = 50

Q = 50/10

Q = 5

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Explanation:

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Expected value = Σpx

Where:

p = the probability of each outcome =50% in this case for both weak and strong economy.

x = the present value of cash flow for each outcome which is $90,000 in case of weak economy and $117,000 in case of strong economy.

Expected value= 0.50(90,000(1+15%)^-1)+0.50(117,000(1+15%)^-1)

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