How many cycles should the profit maximizing firm produce now?

Firm A makes and sells motor cycles. The total cost of each cycle is the sum of the costs of frames Show more Firm A makes and sells motor cycles. The total cost of each cycle is the sum of the costs of frames assembly and engine. The firm produces its own engines according to the cost equation CE = 250000 + 1000q +5q 2 The cost of frames and assembly is $2000 per cycle. Monthly demand for cycles is given by the inverse demand equation: p = 10000 30q (a) Calculate the MC of producing an additional engine. Calculate the MC of producing an additional cycle. Find the firms profit maximizing quantity and price. (b) Now suppose the firm has the opportunity to buy an unlimited number of engines from another company at a price of $1400 per engine. How many cycles should the profit maximizing firm produce now? What price should it charge? Will the firm continue to produce engines itself? If so how many? If not why not? Show all your calculations. Show less

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