Question

A perfectly competitive firm, with MC=q operates in a market character,zed by the following market demand and supply conditions:
Demand: Q=20000-100P
Supply: Q=100P

How much output does this competitive firm produce to maximize profit? Show your work graphically and algebraically.

Answer 1

Answer: 10000 units

Explanation:

First, we've to determine the equilibrium price which will be gotten when we equate the demand to the supply which will be:

20000 - 100P = 100P

100P + 100P = 20000

200P = 20000

P = 20000/200

P = 100

Since Q = 100P

Q = 100 × 100

Q = 10000

The competitive firm will produce 10000 units to maximize profit.