Question 5 The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a competitive gadget maker: TC = £250,000 + £10Q + £0.001Q2 ƏTC MC = = £10 + £0.002Q de TR = £60Q where Q is the number of gadgets produced. a) Find the optimal quantity of gadgets that maximises profit. b) Use the information obtained in part (a) to calculate the profit. c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run equilibrium output and price. d) Market price declines to £40. Should the firm continue operating in the market. Explain.

Question 5 The following are the total cost (TC), marginal cost (MC) and total revenue (TR) functions for a competitive gadget maker: TC = £250,000 + £10Q + £0.001Q2 ƏTC MC = = £10 + £0.002Q de TR = £60Q where Q is the number of gadgets produced. a) Find the optimal quantity of gadgets that maximises profit. b) Use the information obtained in part (a) to calculate the profit. c) If the gadget maker is typical of firms in the industry, calculate the firm's long-run equilibrium output and price. d) Market price declines to £40. Should the firm continue operating in the market. Explain.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter23: Profit Maximization

Section: Chapter Questions

Problem 3E

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