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9 March, 16:04

Suppose a competitive firm has cost, C = (0.002q3 ) + (22q) + 750, marginal cost, MC = 0.006q2 + 22, and revenue, R = 80q. If the firm produces 150 units of output, A. R MC. At this output level (150 units),

A. profit is negative.

B. marginal profit is negative.

C. profit is positive.

D. None of the above.

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  1. 9 March, 19:14
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    Options B and C are correct.

    Marginal profit is negative. Profit is positive.

    Explanation:

    At q = 150

    R = 80q = 80 (150) = 12,000

    C = 0.002 (150) 3 + 22 (150) + 750 = 6750 + 3300 + 750 = 10,800

    R > C so first is incorrect.

    MR = 80

    MC = 0.006 (150 x 150) + 22 = 135 + 22 = 157

    MC > MR so B is correct.

    Profit = TR - TC = 80 (150) - 0.002 (150) 3 - 22 (150) - 750 = 12000 - 10800 = 1200

    Profit is positive.

    Marginal profit = MR - MC = 80 - 157 = - 77

    MR is Negative
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