Suppose that a firm in a perfectly competitive industry has the following marginal cost curve: MC = 2Q + 6

Economics Dec 15, 2020

Suppose that a firm in a perfectly competitive industry has the following marginal cost curve: MC = 2Q + 6. If the market price for the good they produce is $34.05, how many units of this good will the firm produce? Round your answer to two decimal places.

Expert Solution

Answer:14.03

Firms increase output until marginal cost equals marginal revenue. In this case since the firm exists in a perfectly competitive market, marginal revenue is flat at the market price which is 34.05. Thus, we just set marginal cost to 34.05 and solve for Q as shown below:

34.05=2Q+6

Q=14.03

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