A firm has a linear demand function for its product. When the price of the product is Sh.220, the quantity demanded is 40 units. When the price increases to Sh.240, the quantity demanded becomes 30 units. In addition, the firm’s marginal cost function is given by: MC = 40q – 2q2 + 2 Fixed cost = Sh.5 million Where q = quantity demanded, MC = marginal cost (Sh. million) Evaluate the level of output that maximizes profits.

A firm has a linear demand function for its product. When the price of the product is Sh.220, the quantity demanded is 40 units. When the price increases to Sh.240, the quantity demanded becomes 30 units. In addition, the firm’s marginal cost function is given by: MC = 40q – 2q2 + 2 Fixed cost = Sh.5 million Where q = quantity demanded, MC = marginal cost (Sh. million) Evaluate the level of output that maximizes profits.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 19PAE

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