A perfectly competitive firm has a total revenue function of TR = 90Q and cost function...

A perfectly competitive firm has a total revenue function of TR = 90Q and cost function of TC = 30Q2 + 50.

i. Determine the price the firm should charge and the quantity of output that it should produce to maximize profit.

ii. if there are 20 identical firms in the market, what will be the perfectly competitive price and total output produced?

Solutions

Expert Solution

(i)

Price = TR / Q = 90Q / Q = 90

MC = dTC/dQ = 60Q

Each firm will maximize profit by equating Price and MC.

60Q = 90

Q = 1.5

P = 90

(ii)

In perfect competition, each firm is a price taker, therefore, price will remain equal to 90.

Total output = Firm's output x Number of firms = 1.5 x 20 = 30

Rahul Sunny answered 1 year ago

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