Question

If Firm A opertes in a perfectly competitive industry, with market price = $1,200/unit. If Firm A's total cost function is given by TC(g)-20 80q 200, find Firm A's profit maximizing level of output. Using the information from the above question: is the market in which Firm A is selling its output currently in long run equilibrium?

Answer 1

In perfectly competitive market p = mc Tc(q) = 20 q^2 + 80q + 200 mc (q) = d_1c(q)/dq = 40q + 80 p = mc 1,200 = 40q + 80 q = 28 firm profit maximising level of output in 28 profit = TR - TC = p times q - (20 q^2 + 80q + 200) = 1200 times 28 - (20(28)^2 + 80(28) + 200) = 33600 - (15680 + 2240 + 200) = 15,480 since profit of firm A is not 0 so the market is Firm A is selling its output is currently not in long run equilibrium.