Question #58191

Assume the current price of maize K70 per 100 kg and the short run cost function, where Q represents bags of maize per year is:

TC = 800 + 16Q - Q2

a) What is the profit maximizing output?

TC = 800 + 16Q - Q2

a) What is the profit maximizing output?

Expert's answer

The conditions seems inconsistent with the reality: that is, the Total Cost function becomes negative when Q becomes more than 37:

TC (0) = 800 + 16 * 0 - (0 * 0) = 800

TC (38) = 800 + 16 * 38 - (38 * 38) = -36

...

TC (100) = 800 + 16 * 100 - (100 * 100) = - 7600

which means that the cost become "revenue", in fact. Formally, based on the conditions, the answer would be infinity, which is obviously impossible.

TC (0) = 800 + 16 * 0 - (0 * 0) = 800

TC (38) = 800 + 16 * 38 - (38 * 38) = -36

...

TC (100) = 800 + 16 * 100 - (100 * 100) = - 7600

which means that the cost become "revenue", in fact. Formally, based on the conditions, the answer would be infinity, which is obviously impossible.

Learn more about our help with Assignments: Microeconomics

## Comments

## Leave a comment