Exercise 2: A perfectly competitive firm produces two goods, X and Y, which are sold at £36 and £200 per unit, respectively. The firm has a total cost function given by TC = 3x' + 2y-A where x corresponds to the quantity of Product X y corresponds to the quantity of product Y A corresponds to the last two digits of your IE student number. Determine the Profit function of this business scenario. a. b. Find the quantities of each good which must be produced and sold in order to maximise profits What is the maximum profit? C.

Exercise 2: A perfectly competitive firm produces two goods, X and Y, which are sold at £36 and £200 per unit, respectively. The firm has a total cost function given by TC = 3x' + 2y-A where x corresponds to the quantity of Product X y corresponds to the quantity of product Y A corresponds to the last two digits of your IE student number. Determine the Profit function of this business scenario. a. b. Find the quantities of each good which must be produced and sold in order to maximise profits What is the maximum profit? C.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new process lowers the firm’saverage cost, meaning that this firm alone (although still aprice taker) can earn real economic profits in the long run. a. If the market price is $20 per widget and the firm’s marginalcost is given by MC=0.4q , where q is the dailywidget production for the firm, how many widgets willthe firm produce? b. Suppose a government study has found that the firm’snew process is polluting the air and estimates the socialmarginal cost of widget production by this firm to be. If the market price is still $20, what is thesocially optimal level of production for the firm? Whatshould be the rate of a government-imposed excise tax tobring about this optimal level of production? c. Graph your results.
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