Suppose a farmer is a price taker (MR = P = 10)in soybeans with cost functions given by The profit maximizing level of output is

Question

Suppose a farmer is a price taker (MR = P = 10)in soybeans with cost functions given by  The profit maximizing level of output is

Quizplus · Accepted Answer

To find the profit maximizing level of output, the farmer should produce at the level where MR = MC. For a price taker, MR = P, which in this case is 10. The MC equation can be found by taking the derivative of the Total Cost equation with respect to Q: 
MC = 0.1Q + 5.5 
Setting MR = MC: 
10 = 0.1Q + 5.5 
4.5 = 0.1Q 
Q = 45 
Since the question specifies that Q must be a multiple of 10, the closest option is 40. Therefore, the profit maximizing level of output is 40.

Suppose a Farmer Is a Price Taker (MR = P