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April 18, 2014

Homework Help: Economics

Posted by Philip on Sunday, October 14, 2012 at 2:36pm.

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