Use the following data for a competitive industry and a price-taking firm that operates in this market.
Bartech, Inc. is a firm operating in a competitive market. The manager of Bartech forecasts product price to be $28 in 2015. Bartech's average variable cost function is estimated to be $A V C = 10 - 0.003 Q + 0.0000005 Q ^ { 2 }$ Bartech expects to face fixed costs of $12,000 in 2015.
-How much profit (loss) does Bartech, Inc. expect to earn?

Question

Quizplus · Accepted Answer

To find the profit, calculate total revenue and total cost. Total revenue (TR) is price times quantity, $TR = 28Q$. Total cost (TC) is fixed cost plus variable cost, $TC = 12,000 + (10Q - 0.003Q^2 + 0.0000005Q^3)$. Profit is $TR - TC$. Solving for Q where marginal cost equals price gives the quantity that maximizes profit. Substituting this Q into the profit equation gives $96,000.

Use the Following Data for a Competitive Industry and a Price-Taking