Market price is $50. The firm's marginal cost curve is given by:
MC = 10 + 2Q
At this output, is the firm making a profit?
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Market price is $50. The firm's marginal cost curve is given by:
MC = 10 + 2Q
At this output, is the firm making a profit?
Hello wendolyn
I suppose Q represents here the article cost price ?
So 50 = 10 + 2Q --> 2Q = 50 - 10 = 40 --> Q = 20
Nett profit = selling price less cost price less operational costs.
If there is any profit depends now on the total operational costs : if that exceeds $ 30 per sold item there is a loss. It is lower than $ 30 there is a profit.
The gross margin here is 30/50 or 60%. In general that is not bad at all.
So it all depends on how the operational costs are build up and how that cost is spread over the sales package.
As that information is not provided here it is impossible to draw any conclusion.
:)
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