Suppose that the demand for a product produced and sold by a single U.S. firm in the U.S. market is Q_USUS = 10 !2P^US, where output is in million of units. If the marginal cost of production is $2 per unit, the market price per unit is:

Question

Quizplus · Accepted Answer

The profit-maximizing firm will set marginal cost equal to marginal revenue. Marginal revenue is the derivative of total revenue with respect to quantity, which is equal to 10 - 4P^US. Setting this equal to marginal cost of $2, we get 10 - 4P^US = 2, which implies P^US = $2.50.

Suppose That the Demand for a Product Produced and Sold