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December 23 , 2009

Marginal Cost of Production


Suppose you are the manager of a watchmaking firm operating in a competitive market.  Your cost of production is given by C = 200 +2 q2, where q is the level of output and C is total cost.  (The marginal cost of production is 4q.  The fixed cost of production is $200.)
(a) If the price of watches is $100, how many watches should you produce to maximize profit?
(b) What will the profit level be?
(c) At what minimum price will the firm produce a positive output?

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