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Choose the correct mathematical model for calculating profit.
Let q = production volume (quantity produced)
R = revenue per unit
FC = the fixed costs of production
MC = material cost per unit
LC = labor cost per unit P(q) = total profit for producing (and selling) q units
(i) P(q) = Rq - FC - (MC)q - (LC)q
(ii) P(q) = Rq + FC + (MC)q + (LC)q
(iii) P(q) = Rq + FC - (MC)q + (LC)q
(iv) P(q) = Rq + FC + (MC)q - (LC)q
It is important for a firm to understand the different strategy's that have for the various activities involved in the business.
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