<p>A firm called Altobella Vineyard produces Concord grapes in a perfectly compe

Question

<p>A firm called Altobella Vineyard produces Concord grapes in a perfectly competitive market in which monthly demand is given by the equation Q = 1800 - 16P and monthly supply by the equation Q = -660 + 14P, where P is the price per crate of grapes and quantities are in crates per month.<br /><br />Q. Altobella incurs monthly total costs according to the function TC = 361 + 20q + q&#178; and monthly marginal costs according to the function MC = 20 + 2q, where q is the quantity of grapes produced by Altobella. Assuming Altobella is a profit-maximizer, how many crates of grapes will it produce in a typical month?</p>

Explanation / Answer

MR (or P) = MC (This is a fundamental concept) Since the equilibrium quantity is where Qd (1800 - 16P) = Qs (-660 + 14P) Rearrange the equation so that 2460 = 30P. Solve for P. Set P = 20 + 2q. Solve for q.

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