Suppose a firm has the following total cost function TC = 100 + 2q2. If price equals $20, what is the firm's output decision? What are its short-run profits?

What will be an ideal response?


MC = 4q. To maximize profit, set 20 = 4q, or q = 5. Profit = TR - TC = (20 ? 5 ) - (100 + 50 ) = -50. Since FC = 100, the firm will produce 5 units and operate at a loss of 50 rather than shutting down and incurring a loss of 100.

Economics

You might also like to view...

The main policy making body of the Federal Reserve System is the

A) Federal Monetary Conditions Board. B) Board of Presidents of the Federal Reserve Banks. C) Board of Governors of the Federal Reserve System. D) Federal Open Market Committee. E) Board of Advisors.

Economics

Jeremiah is not a fan of the ballet, but he believes that his friends all enjoy the cultural experience that ballet brings and he does not want to appear unsophisticated

Unbeknownst to Jeremiah, all of his friends share the same opinion of the ballet as he does, and none of them want to appear unsophisticated to the rest of the grouA) diffusion of responsibility. B) dysfunctional family syndrome. C) pluralistic ignorance. D) a prisoner's dilemma.

Economics

At the beginning of the year, Tom's Tubes had a capital stock of 5 tube inflating machines. During the year, Tom scrapped 2 old machines and purchased 3 new machines. Tom's capital stock at the end of year equals

A) 1 machine. B) 2 machines. C) 3 machines. D) 6 machines.

Economics

Thinking about information as a good, what determines the information people are willing to pay for?

What will be an ideal response?

Economics