A firm's profit function is pi (q) = R(q) = C(q) = 40q - (110 + 20q + 10q^2). 1. What is the positive output level that maximizes the firm's profit (or minimizes its loss)?
2. What is the firm's revenue, variable cost, and profit? Should it operate or shut down in the short run?
3. The output level at which the firm's profit is maximized is q =. (Enter your response as a whole number.)

1)

2)  variable cost would be = 20 + 10 = 30,  revenue = 40 , -100

3) Q = 1

Explanation:

The firm's profit function is given as

1) The positive output level that maximizes the firm's profit

can be expressed as the derivative of the given function

=

2) The firm's revenue, variable cost and profit

variable cost = 20 + 10q  ( from the given function )

when q = 1  variable cost would be = 20 + 10 = 30

TR = 40q = revenue  ( from given function)

when q = 1 then revenue = 40

hence variable cost is less than Revenue ( firm should operate in short run)

profit = Revenue - total cost = 40 - 140 = -100

3) The output level at which the firms profit is maximized is

q = 1

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: