For a perfectly competitive firm, $S T C = 100 + 20 q + q ^ { 2 } \text { and } S M C = 20 + 2 q$ , where q is output. If the market price is equal to 40, at what level of output should the firm operate to maximize profit in the short run?
A)10
B)20
C)30
D)40

Question

Quizplus · Accepted Answer

To maximize profit in the short run, a perfectly competitive firm should produce at the level where the market price equals the marginal cost (MC). Given the market price is 40, we set the SMC equal to 40 and solve for q: $40 = 20 + 2q$, which simplifies to $20 = 2q$, and further to $q = 10$.

For a Perfectly Competitive Firm STC=100+20q+q2 and SMC=20+2qS T C = 100 + 20 q + q ^ { 2 } \text { and } S M C = 20 + 2 qSTC=100+20q+q2 and SMC=20+2q

For a Perfectly Competitive Firm $S T C = 100 + 20 q + q ^ { 2 } \text { and } S M C = 20 + 2 q$