4- A noncompetitive firm with the production function Q=0.5-√ī faces the following demand function for its product P = 7800 - 350 The firm pays a wage of $40 per unit and has $500 of fixed cost. a) What is the firm's profit maximizing level of output, price, and labor utilization? b) What is the firm's profit or loss?

4- A noncompetitive firm with the production function Q=0.5-√ī faces the following demand function for its product P = 7800 - 350 The firm pays a wage of $40 per unit and has $500 of fixed cost. a) What is the firm's profit maximizing level of output, price, and labor utilization? b) What is the firm's profit or loss?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.7P

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A firm has a linear demand function for its product. When the price of the product isSh.220, the quantity demanded is 40 units. When the price increases to Sh.240, thequantity demanded becomes 30 units. In addition, the firm’s marginal cost function isgiven by:MC = 40q – 2q2 + 2Fixed cost = Sh.5 millionWhere q = quantity demanded, MC = marginal cost (Sh. million)Evaluate the level of output that maximizes profits.
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