Suppose a farmer is a price taker for soybean sales with cost functions given by ?
TC = .1q² + 2q + 30
MC = .2q + 2
The profit maximizing level of output is

Question

Suppose a farmer is a price taker for soybean sales with cost functions given by ? TC = .1q² + 2q + 30 MC = .2q + 2 The profit maximizing level of output is A)0 B)30 C)40 D)50

Quizplus · Accepted Answer

To maximize profit, the farmer should produce at the quantity where MC=MR. 
Given that the farmer is a price taker, MR=P. 
Therefore, setting MR=MC, we get: 
P = 0.2q + 2 
Since the farmer is selling soybeans, P is given by the demand curve in the market. Let's assume it is $10. 
10 = 0.2q + 2 
8 = 0.2q 
q = 40 
Therefore, the profit maximizing level of output is 40.

Suppose a Farmer Is a Price Taker for Soybean Sales