In: Economics
What is the profit maximizing level of output for a firm with the marginal cost function MC = 1.6Q2-15Q+60 and a marginal revenue function MR = 280-20Q?
Profit is maximized where;
Marginal revenue (MR) = Marginal cost (MC)
280-20Q = 1.6Q2-15Q+60
1.6Q2+5Q-220=0
Using quadratic formula to solve for Q
a=1.6, b=5, c=-220
There cannot be can’t have negative output.
Therefore, Profit maximising level of output is Q = 10.27.
There cannot be can’t have negative output. Therefore, Profit maximising level of output is Q = 10.27.