Problem: A firm uses a single plant with costs C = 160 + 16Q + .1Q2 and faces the price equation P = 96 - .4Q.
Question 1: Find the firm's profit-maximizing price and quantity. What is its profit?
Question 2: The firm's production manager claims that the firm's average cost of production is minimized at an output of 40 units. Furthermore, she claims that 40 units is the firm's profit-maximizing level of output. Explain whether these claims are correct.
Question 3: Could the firm increase its profit by using a second plant (with costs identical to the first) to produce the output in part (a)? Explain.