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You are the manager of a firm that sells a commodity in a market that resembles perfect competition, and your cost function is   C(Q)= 2Q+3Q2. Unfortunately, due to production lags, you must make your output decision prior to knowing for certain the price that will prevail in the market. You believe that there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600.

Calculate the expected market price.

What output should you produce in order to maximize expected profits?

What are your expected profits?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91229848

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