Homework #3 - 40 x 10 = 400 (3) what is the minimum level...

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Homework #3 For a particular perfectly competitive firm, STC = 100 + 20Q + Q 2 . If the market price is equal to 40, (1) at what level of output should the firm operate to maximize profit? In order to maximize profit, MC=P/MR MC= 20 + 2Q, P = 40 20 + 2Q = 40 Q = 10 (2) what is the maximum profit the firm can earn? Profit = P x Q
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Unformatted text preview: 40 x 10 = 400 (3) what is the minimum level of average variable cost? Minimum AVC when AVC = MC AVC = 20Q + Q 2 /Q = 20 + Q AVC = MC 20 + Q = 20 + 2Q Q = 0 (4) if all fixed costs are sunk, find out the firm’s short-run supply curve. Firm’s supply curve when P > 0 is P = MC P = 20 + 2Q Q = ½ P – 10...
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This note was uploaded on 08/08/2011 for the course ECON 220:103 taught by Professor Clare during the Spring '11 term at Rutgers.

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