Rogue Fitness equipment produces barbells that are sold in a highly competitive market. Currently, barbells sell...
Rogue Fitness equipment produces barbells that are sold in a highly competitive market. Currently, barbells sell for $20 per barbell. Rogue Fitness' total and marginal cost curves are:
TC = 9,000 + 0.1Q2
MC = 0.2Q
Calculate Rogue Fitness' profit maximizing quantity. Is the firm earning a profit at the profit maximizing quantity?
Homework Answers
Answer : For highly competitive market the profit maximizing condition is P = MC. So,
20 = 0.2Q
=> Q = 20 / 0.2
=> Q = 100
TR (Total revenue) = P * Q = 20 * 100 = $2,000.
TC = 9,000 + 0.1 (100)^2
=> TC = $10,000
Profit = TR - TC = 2,000 - 10,000 = - $8,000
Therefore, here at profit-maximizing quantity level the firm is not earning profit.
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