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Biwei’s Barbershop is a business in a perfectly competitive market with total cost of TC = 0.5Q 2 per day. The corresponding marginal cost is MC=Q. Assume that the market price of a haircut is $15.

How many haircuts should Biwei give each day if he wants to maximize his profit? What is the profit?

Respuesta :

Answer:

It should give 15 haircut

And maximum profit will be 112.5

Explanation:

It is given total cost [tex]TC=0.5Q^2[/tex]

Corresponding marginal cost MC = Q

For maximizing profit P = MC

Assuming market price of haircut Q = 15

So it should give 15 haircut

So P = MC = Q = 15

Profit is equal to

Profit = PQ - TC

[tex]=15\times 15-0.5\times 15^2[/tex]

=112.5

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