The market
demand and supply functions for some commodity Q have been estimated (this market is assumed to be
perfectly competitive.), respectively, as:
QD= 20,000 -400P.
QS= 5,000 + 600P.
where P is the price (dollars per unit) and Q is the rate of sales (output per month).
Consider a single firm in this market which has a total cost function given as:
TC = 500 + 25q -5q^2+ (2/3)q^3
where q is the firm’s output level.
What is this firm’s profit maximizing level of output? What are its profits?
Numbers expected
.
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