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2. Suppose that a firm sells in a highly competitive market, in which the going price is $15 per unit. The firm’s cost equation is C = $25 + .25Q2. (8) Find the profit-maximizing level of output for the firm. Determine its level of profit.
b)Suppose that fixed costs increase to $75.Verify that this change in fixed costs does not affect the firm’s optimal output.
3.Suppose a firm’s price function is P = 120 – .5Q and its cost equation is C = 420 + 60Q + Q2. (7)
a.Find the firm’s optimal quantity, price and profit (1) by using the profit and marginal profit equations and (2) by setting MR = MC.
b.Suppose instead that the firm can sell any and all its output at the fixed market price P = 120. Find the firm’s optimal output.
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