2. Suppose George, a custom herbicide applicator is running a business where there is lot of competition. At a rate of $7 per acre, he is competitive and can sell his service for as many acres as he likes. However, custom herbicide application is very time sensitive and doing more acres comes at an increasing opportunity of cost time. George estimates his total cost function is equal to C = 20,000 + 3A + .0001 A2

(5) 2a. Use calculus to derive the Marginal Cost per acre.

(5) 2b. If P = MC how many acres should this competitive firm spray?

(10) 2c. What is the profit maximizing objective function for this firm? (Please use equation editor to type this answer).

(10) 2d. Using the first order condition for profit maximization, derive the profit maximizing number of acres. Calculate the maximum profit.

(10) 2e. Using MS Excel, plot Total revenue, Total Cost and Profits for this firm varying acres from zero to 35,000. 

Answer rating: 100% (QA)

2a To derive the Marginal Cost MC per acre we need to take the derivative of the total cost function ... View the full answer