A firm faces the demand curve $P = 200 - 4Q$ and has total cost $TC = 5Q^{2} + 20Q + 100$.\n(i) Find the output level that maximises profit.\n(ii) Calculate the maximum profit.\n(iii) Should the firm produce in the short run? Justify by comparing price with average variable cost.

Question

Accepted Answer

Output = 10 units; Maximum profit = 800; Produce (price > AVC)

Gce Model Questions Vol1 2020 Economics Question 20

A firm faces the demand curve \(P = 200 - 4Q\) and has total cost \(TC = 5Q^{2} + 20Q + 100\).\n(i) Find the output level that maximises profit.\n(ii) Calculate the maximum profit.\n(iii) Should the firm produce in the short run? Justify by comparing price with average variable cost.

Answer Options

About This Question

Master the Exam!