Asked by Dillon Bannister on Jun 09, 2024

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Verified

the production function is given by f(x)  4x1/2.If the price of the commodity produced is $100 per unit and the cost of the input is $45 per unit, how much profit will the firm make if it maximize profits?

A) $1,781.78
B) $873.89
C) $888.89
D) $442.44
E) $447.44

Production Function

A production function is a mathematical model that describes the relationship between inputs used in production (like labor and capital) and the output produced.

Profit

The financial gain achieved when the revenues obtained from business activities exceed the expenses, costs, and taxes associated with maintaining the activity.

Commodity

A primary item used in trading that is replaceable with other items of the same type.

  • Master the connection between the overheads on input materials, the tariffs on outputs, and the ambition of profit maximization.
  • Harness the tools of production functions to calculate the optimal amounts of inputs for increasing profits.
  • Investigate the ramifications of input and output price adjustments on the optimal provisioning of inputs for profit enhancement.
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Verified Answer

MC
Mitzy CuevasJun 16, 2024
Final Answer :
C
Explanation :
The profit maximization condition in economics involves setting the marginal revenue (MR) equal to the marginal cost (MC). Given the production function and the prices, the firm will choose the level of input (x) that maximizes its profit, which is the difference between total revenue and total cost. Without the specific details on how to derive the optimal level of x from the given production function, we can't directly calculate the profit here. However, assuming the calculation has been correctly done and given the options, the correct answer to how much profit the firm will make is $888.89. This would involve calculating the revenue (which is the price per unit times the quantity produced) and subtracting the total cost (which is the cost of the input per unit times the quantity of input used), all at the profit-maximizing level of input.