The Green Company produces chemicals in a perfectly competitive market. The curr

Question

The Green Company produces chemicals in a perfectly competitive market. The current market price is $40. The firm’s total cost is given by so that marginal cost is

A. Determine the firm’s profit maximizing output and profit. Show your calculations.          (1+1+5 points)

B. What is the individual firm’s supply curve? Show your calculations.                          (1+3 points)   

C. Suppose that 100 firms currently serve this market. What is the equation for the market supply curve? Show your calculations.                                                                                   (1+2 points)   

8. The CEO of a major automaker overheard one of its division managers make the following statement regarding the firm’s production plans: “In order to maximize profits, it is essential that we operate at the minimum point of our average total cost curve.” If you were the CEO of the automaker, would you praise or chastise the manager? Explain.   

Explanation / Answer

Marginal cost is not visible in the question so again cost the question with Marginal cost

Or i can give you an idea here to solve yourself

Here i assume MC = 2q , you can replace it with your MC and can get answer

A. For Profit to be maximized

P = MC , 40 = 2q

so, q = 20 ,

Profits = Price*Quantity = 40*20 = 800

b. Supply curve is P = MC

P = 2q

q = P/2 is supply curve

c For 100 firms

Total Q = q1 + q2 +q3 +..............+ q100

So Market supply curve is Q = P/2

8. If I were the CEO of the automaker, would I would praise the manager as the minimum point of the average total curve is the point were the marginal cost intersects the the average total curve and profit is maximized here as for any quantity above this marginal cost will be higher then average total cost and hence will create loss.

If it is not clear to you and you need more clarification , you can comment , i will be happy to help you understand by explaining in detail.:)

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