A price taking firm that has TC = 2q²+ 10 and faces a market price of Pe = 8 will produce what quantity?

Question

Quizplus · Accepted Answer

To determine the optimal quantity, the firm should produce where marginal cost (MC) equals the market price (Pe). The firm's marginal cost can be found by taking the derivative of total cost (TC) with respect to quantity (q):

MC = dTC/dq = 2S1U1P12S1S1P0S1U1P1S1P0

Setting this equal to the market price of Pe = 8:

8 = 2S1U1P12S1S1P0S1U1P1S1P0

Solving for q, we get:

q = 2

Therefore, the firm should produce a quantity of 2 to maximize its profit. Choice C is the correct answer.

A Price Taking Firm That Has TC = 2q2

A Price Taking Firm That Has TC = 2q²