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##### Economics exercise:

**Description**

solution

**Question**

Define Q to be the level of output produced and sold, and assume that the firm?s cost function is given by the relationship;TC=20+5Q+Q^2;Furthermore, assume the demand for the output of the firm is a function of price P given by the relationship;Q=25-P;Define total profit as the difference between total revenue and total cost, and express in terms of Q the total profit function for the firm. (Note: Total revenue equals price per unit times the number of units sold.);Determine the output level where total profits are maximized.;Calculate total profits and selling price at the profit maximizing output level.;If fixed costs increase from $20 to $25 in the total cost relationship, determine the effects of such an increase on the profit maximizing output level and total profits.

Paper#15402 | Written in 18-Jul-2015

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