Laura's Internet Services Has the Following Short-Run Cost Curve

question 115

Essay

Laura's internet services has the following short-run cost curve: where q is Laura's output level,K is the number of servers she leases and r is the lease rate of servers.Laura's short-run marginal cost function is: Currently,Laura leases 8 servers,the lease rate of servers is $15,and Laura can sell all the output she produces for $500.Find Laura's short-run profit maximizing level of output.Calculate Laura's profits.If the lease rate of internet servers rise to $20,how does Laura's optimal output and profits change?

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Definitions:

Price Effect

The price effect describes how changes in price influence the quantity demanded or supplied in the market.

Oligopolist

A market participant in an oligopoly, a market dominated by a small number of firms.

Production Decision

The determination made by a firm regarding the quantity of goods or services to be produced, based on factors like cost of production, market demand, and competition.

Output Effect

The impact on the total production/output of a firm or economy as a result of changing price levels, often referring to the relationship between price changes and quantity supplied.