Determine the maximum expected profit of the firm

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Question: A risk-neutral manager of a firm in a perfectly competitive market must decide how many units of output to produce. Based on the available information she knows that there is a 1/6 probability that the market price will be $18, a 1/3 probability that it will be $12, and a 1/2 probability that it will be $6. The firm's total cost is TC=0.125Q2 and its marginal cost is MC=0.25Q. Determine the maximum expected profit of the firm. Show your work!

Reference no: EM133630489

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