Posted by Trisha on .
Okay, this is due Tuesday. I'm woking on it but if anyone can help that would be great!
Suppose firm A opeates in a perfectly competitive market. The price that currently prevails in the market is $1,000. Firm A's marginal cost is 20Q, where Q is output. Thus, as output increases, marginal cost will increase.
a) In general, what is a perfectly competitve firm's profit maximizing condition.
I believe this is MR=MC
b) Using the condition in part a, calculate firm A's profit-maximizing level of output.
c) For the output calculated in part b, assume the average total cost is $900. Calculate firm A's economic profit or loss.
Thanks for your help!
Your are correct, set MR=MC, solve for Q (simple algebra). Note, MR=P, and Total revenue=P*Q.
Thanks! So for part c I came up with a profit of $5,000. Is that correct?