Suppose you are the manager of a watchmaking rm operating in a competitive market. Your cost of production is given by C = 200+2q2
, where q is the level of output and C is total cost. (The marginal cost of production is 4q; the xed cost is $200.)
a. If the price of watches is $100, how many watches should you produce to maximize profit?
b. What will the prot level be?
c. What is the smallest the price can be for the firm to produce in the short-run? In the long-run?