Mathematics

Mathematics

Problem

A firm sells a product with demand equation p=90−0.5qp = 90 - 0.5q, where pp is the price per unit (dollars) and qq is the quantity demanded. Its cost function is C(q)=25q+FC(q)=25q + F, where F>0F>0 is a fixed cost. The firm chooses qq to maximize profit. How does an increase in FF affect the optimal production quantity and the optimal price? a) The optimal quantity decreases and the optimal price increases. b) Both the optimal quantity and the optimal price remain unchanged. c) The optimal quantity remains unchanged, but the optimal price increases. d) The optimal quantity increases and the optimal price decreases.

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