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April 18, 2014

Homework Help: ECONOMICS

Posted by STARR on Saturday, May 15, 2010 at 12:40pm.

A firm uses a single plant with costs C= 160 +16Q +.1Q2 and faces the price equation P= 96 Ė .4Q.
a) Find the firmís profit-maximizing price and quantity. What is the profit?


b) The firmís production manager claims that the firmís average cost of production is minimized at an output of 40 units. Furthermore, she claims that 40 units is the firmís profit-maximizing level of output. Explain whether these claims are correct.

c) Could the firm increase its profit by using a second plant (with costs identical to the first) to produce the output in part (a)? Explain.

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