Homework Answers
3)
A competitive firm sets its output level such that MC=p to maximize the profit. So, Set MC=p
0.2q=10
q=50
Optimal output is 50 units
Total Revenue=TR=p*q=10*50=500
TC=10+0.1q2=10+0.1*50^2=260
Optimal Profit=TR-MC=500-260=240
Correct option is
a) 240
4)
Given
p=55-Q
In case of Monopoly q=Q.
Total Revenue=p*q=(55-q)*q=55q-q^2
Marginal Revenue=MR=dTR/dq=55-2q
Set MR=MC for profit maximization
55-2q=2q-5
60=2q
q=30
Optimal output for monopolist is 30 units
p=55-q=55-30=25
Correct option is
b) 25
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