Answer:
Therefore the output level at which the firm's profit is maximized is = -100.it indicates a loss
Explanation:
Given that,
the firm's profit function,
(q) = 40q - (110 +20q +10q^2)
The Profit is maximised by taking the first formula of the profit function with respect to. q and putting it equal to 0, (first order condition). This gives us,
dπ (q)/dq = 40 - 20 - 20q = 0
The variable cos of the firm's average is , AVC= 20 +10q. At q=1, AVC= 30.
Since AVC is less the price, then the firm will function in the short run.
(since TR= 40q and q=1, therefore p=40).
It gives q=1
At q=1, revenue = 40, total cost= 140, therefore maximum profit = -
