Market price is $50. The firm’s marginal cost curve is given by MC = 1

Market price is $50. The firm’s marginal cost curve is given by MC = 10 + 2Q.

a. Find the profit-maximizing output for the firm.
b. At this output, is the firm making a profit? Explain your answer.

ANSWER

a. 50 = 10 + 2Q
Q* = 20
b. It is impossible to say without further information. We know that at a quantity of 20, the firm will maximize profit or minimize loss, but without information on total costs, we cannot tell if there is a profit or loss.