Question

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?

Answer 1

Answer:

It should give 15 haircut

And maximum profit will be 112.5

Explanation:

It is given total cost $TC=0.5Q^2$

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

$=15\times 15-0.5\times 15^2$

=112.5