Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose that a firm in a perfectly competitive market has the following revenue and cost functions: R(q) = pq and C(q) = 75+ 0.07q+0.04q.
Suppose that a firm in a perfectly competitive market has the following revenue and cost functions: R(q) = pq and C(q) = 75+ 0.07q+0.04q. Since this firm can sell any quantity of production at a market price of p, its marginal revenue is p. Further, take as a given that its marginal cost is 0.07 + 0.08q. MR(q) = p and MC(q) = 0.07 + 0.08q. a. Write an expression for this firm's fixed cost and average fixed cost. b. Write an expression for this firm's variable cost and average variable cost. c. If the market price for this firm's product is $3.55 per unit, at what output level does this firm maximize its profits? d. How much economic profit or loss does this firm make at its profit maximizing output level when p = MR = $3.55? e. Suppose the firm invests in some capital technology which doubles its fixed cost and halves its variable cost. I.e., its cost function is now C(q) = 150+ 0.0359 +0.02q and its marginal cost is MC(q) = 0.035 +0.04q. At what output level does this firm maximize its profits and how much profit will it make? Suppose that a firm in a perfectly competitive market has the following revenue and cost functions: R(q) = pq and C(q) = 75+ 0.07q+ 0.04q. Since this firm can sell any quantity of production at a market price of p, its marginal revenue is p. Further, take as a given that its marginal cost is 0.07 +0.08q. MR(q) = p and MC(q) = 0.07 + 0.08q. a. Write an expression for this firm's fixed cost and average fixed cost. b. Write an expression for this firm's variable cost and average variable cost. c. If the market price for this firm's product is $3.55 per unit, at what output level does this firm maximize its profits? d. How much economic profit or loss does this firm make at its profit maximizing output level when p = MR = $3.55? e. Suppose the firm invests in some capital technology which doubles its fixed cost and halves its variable cost. I.e., its cost function is now C(q) = 150+ 0.035q +0.02q and its marginal cost is MC(q) = 0.035 +0.04q. At what output level does this firm maximize its profits and how much profit will it make?
Step by Step Solution
★★★★★
3.39 Rating (152 Votes )
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started