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Unformatted text preview: + 4,000 P +4,000P 510,000 = 12,000P /12,000 /12,000 42.5 = Price 42.5 = 2 + 1.6 q-2 -2 40.5= 1.6q Profit is maximized when production is at 25.312 b. Calculate the total profit of the firm Profit = Price- ATC Profit = 42.5 - c. How much is the fixed cost of the firm? 4. Assume that the market demand from the previous problem decreases by 300,000 units. a. Assuming the same Qs equation, calculate the new market price b. Using the same information for the firm (TC and MC equations), calculate the optimal level of production of the firm and its profit c. Firms should keep producing, even if the have a negative profit, if their variable costs are greater than their revenue. According to this, should this firm keep producing or should it shut down?...
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This note was uploaded on 04/08/2008 for the course ECON 120 taught by Professor Serpa during the Spring '08 term at Ill. Chicago.
- Spring '08
- Perfect Competition