1. Suppose a perfectly competitive firm has a cost function described by TC = 200Q+ Q² +225 Each firm's marginal revenue is $240. a. Find the profit maximizing level of output. b. Is this a short-run or long-run situation? How do you know? c. Assuming that this firm's total cost curve is the same as all other producers, find the long-run price for this good.

1. Suppose a perfectly competitive firm has a cost function described by TC = 200Q+ Q² +225 Each firm's marginal revenue is $240. a. Find the profit maximizing level of output. b. Is this a short-run or long-run situation? How do you know? c. Assuming that this firm's total cost curve is the same as all other producers, find the long-run price for this good.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following offers the best explanation of why “marginal revenue equals marginal cost” is the rule that indicates the profit-maximizing output level? a. If output were reduced from the profit-maximizing level, then the firm would be gaining marginal revenue that exceeds marginal cost, and thus increasing the level of profit. b. The marginal revenue is equal to the marginal cost at all levels of output for a perfectly competitive firm. c. If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit. d. Because the firm colludes with other similar firms to set price equal to marginal cost.
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Fill in the Blanks Fill in the blank. "For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be and beyond that level of output Marginal Cost must be
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