How much is its total profit including subsidy

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A firm’s total cost function is TC = 2q^2 + 5q + 10 . The firm is a price taker and the market price for its product is $25. The firm also receives a subsidy from the government because it is operating in a high tech industry and the government encourages such high tech firms. The government has two subsidy options. In option 1, the firm can receive a fixed $25 subsidy. In option 2, the firm receives $4 for each unit of its products.

a. In option 1, how many will it produce to maximize total profit (including the subsidy)? How much is total cost? Profit before subsidy? How much subsidy does it receive? How much is its total profit including subsidy?

b. In option 2, how many will it produce to maximize profit (including the subsidy)? How much is total cost? Profit before subsidy? How much subsidy does it receive? How much is its total profit including subsidy?

c. Which option would the firm choose?

Reference no: EM13897116

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