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Firm A makes and sells electric cars. The total cost is the sum of the costs of frames, assembly, engines including batteries. The firm makes its own engines according to this formula:
CE = 500,000 + 2,000Q + 10Q^2. The cost of the frames and assembly is $4000 per electric car. Monthly demand for the electric cars is P = 20,000 – 60 Q.
a) What is the marginal cost of producing an additional engine? What is the firm’s optimal profit maximizing quantity and price?
Business Economics
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