Using the firms marginal cost curve compute the, Ask an Expert

Economics

The retail market for unleaded gasoline is fiercely price competitive. Consider the situation faced by a typical gasoline retailer when the local market price for unleaded gasoline is $1.80 per gallon and total cost (TC) and marginal cost (MC) relations are

TC= $40,000 + $ 1.64Q + $0.0000001Q^2

MC= Î"TC/Î"Q= $1.64 + $ 0.0000002Q

and Q is gallons of gasoline. Total cost include a normal profit.

A. Using the firms marginal cost curve, compute the profit-maximization long-run supply curve for typical retailer.

B. Compute the average total cost curve for the typical gasoline retailer, and determine that average total cost are less than price at the optimal activity level.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M9306555

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