A price taking firm faces a price of 30$, and has a marginal costs given by...

A price taking firm faces a price of 30$, and has a marginal costs given by MC = q+5

A) Draw the demand curve faced by the firm and its marginal cost curve in a graph, calculate and show the optimal level of output for the firm

B) What are the variable costs of this firm at the profit maximizing level of output

C) What is the producer surplus of the firm

Solutions

Expert Solution

Quantity	MC	Price
0	5	30
5	10	30
10	15	30
15	20	30
20	25	30
25	30	30
30	35	30
35	40	30

The, optimal output = 25 units

Because, P = MR = MC at this level of output.

Variable cost of the firm = (5-0)*25 + (1/2)*(30-5)*25

Variable cost of the firm = $437.5

Producer surplus = (1/2)*(30-5)*25

Producer surplus = $312.5

Rahul Sunny answered 1 year ago

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