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Calculate the expected market price

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Reference no: EM133128560

Suppose you are the manager of an Agriculture company that sells "commodities" in a perfect competition market. Your firm's total cost function is TC = 20Q2 - 480Q + 1724. Unfortunately, due to Covid 19 pandemic, you must set the production output without knowing for certain the price that will prevail in the market. However, there is a 70 percent chance the market price will be $200 and a 30 percent chance it will be $600.

a. Calculate the expected market price.

b. What output should you produce in order to maximize expected profits?

c. What are your expected profits?

Reference no: EM133128560

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