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.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 3E
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A firm has a linear
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.
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