Mr.O.Carr has the cost function c(y)  y2  64 if his output, y, is positive and c(0)  0.If the price of output is 12, Mr.Carr's profit-maximizing output is zero.

Question

Mr.O.Carr has the cost function c(y)   y2    64 if his output, y, is positive and c(0)   0.If the price of output is 12, Mr.Carr's profit-maximizing output is zero.

Scarlett Traver · Accepted Answer

Final Answer : False, Explanation :  In order for Mr. Carr to maximize his profit, he should produce output where marginal revenue equals marginal cost. However, since the cost function is strictly increasing for positive values of y, this implies that marginal cost is also increasing. Therefore, marginal cost will exceed the price of output, 12, at some point, thereby making it unprofitable for Mr. Carr to produce any output. Therefore, his profit-maximizing output is not zero.

Mr.O.Carr has the cost function c(y) y2  64 if his output, y, is positive and c(0) 0.If the price of output is 12, Mr.Carr's profit-maximizing output is zero.

Definitions

Learning Objectives

Learning Objectives

Related questions