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A competitive firm has the following quadratic TC function

TC = 5Q2+ 200

Assume the market price P is $175 per unit.

(a) How much it costs the firm to produce the 11th unit of output?

(b) What is the marginal profit of the 11th unit of output?

(c) What is the firm's profit maximizing level of output? What is its profit?

(d) What is marginal profit of the last unit of output?

(e) What is the long-run price established in this market?

(f) What is the output and profit for the firm in the long-run?

In some industries a firm's profit maximization objective is basically a revenue maximization problem. A good example is the operation of sport clubs, espe- cially when the franchises do not own the arena or stadium they play in. With a stadium/arena lease and players' contracts in place, the cost of operation of a team for a season is very much known. Therefore, profit is largely determined by revenue from ticket sales and merchandising. Managing rental apartment complexes and hotels are other variations on this theme.

Microeconomics, Economics

  • Category:- Microeconomics
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