A producer finds that demand for his commodity obeys a linear equation p+.5x=5.5, where p is in thousands of dollars and x is in thousands of units. If the producer's cost are given C(x)=3+1x, what should his level of production be to maximize profits?
16 minutes ago

Question

A producer finds that demand for his commodity obeys a linear equation p+.5x=5.5, where p is in thousands of dollars and x is in thousands of units.  If the producer's cost are given C(x)=3+1x, what should his level of production be to maximize profits?
16 minutes ago

anonymous · Answer

ok, to maximize profits, set P = MC (for perfectly competitive market). So you have, p =5.5-.5x = 1= MC. Now solve for x, 5.5 = 1 +.5x, x = 9. So produce 9 units.