Answer:
Q = 1,000
Explanation:
The firms will product until marginal revenue matches marginal cost
being marginal cost $50
then the revenue per additional unit of cigarettes sold should be $50
Revenue = P x Q
Revenue = (450 - 0.20Q) x Q = -0.20Q^2 + 450Q
Marginal revenue: slope of the revenue function:
dRq/dQ = -0.4Q + 450
Now we equalize and solve for Q
Marignal Revenue = Marginal Cost
-0.4Q +450 = 50
(450 - 50) = 0.4Q
400 / 0.4 = Q
Q = 1,000
