Question: 8. It is possible to use equations to do marginal analysis. Suppose your firm has a marginal revenue given by MR = 10 - Q.

8. It is possible to use equations to do marginal analysis. Suppose your firm has a marginal revenue given by MR = 10 - Q. This means that the seventh unit of output brings in 10 - 7 = $3 of additional revenue. The marginal cost for your firm is MC = 2 + Q. This means that the seventh unit of output increases cost by 2 + 7 = $9.

a. Is it a good idea to produce the seventh unit of output? Why or why not?

b. Find the Q that sets marginal cost equal to marginal revenue 1MC = MR2. As a preview of upcoming chapters, try to explain why this value maximizes profit.

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