2/21/24, 9:49 PM ChatGPT

To determine the profit-maximizing output for the firm before and after tax, we need to set up
and solve the profit maximization problem.

The profit function (𝜋) for the firm is given by the difference between total revenue (TR) and total cost
(TC):

π = TR − TC

Total revenue is the product of quantity (Q) and price (P ), and total cost is given by the average total
cost (ATC) multiplied by quantity:

TR = P ⋅ Q
TC = ATC ⋅ Q

The demand function Qd is given as 60 − 2P , and the average total cost ATC is given as 3 + 2Q +
100/Q.

Before tax, the profit maximization condition is where marginal cost (MC) equals marginal revenue
(MR):

MC = MR

Marginal cost is the derivative of the total cost with respect to quantity ( Q), and marginal revenue is
the derivative of the total revenue with respect to quantity:

MC = dTC
dQ
MR = dTR
dQ

Let's find the profit-maximizing output before tax:

Total Revenue (TR):

TR = P ⋅ Q
TR = (60 − 2P ) ⋅ P
Total Cost (TC):
TC = (3 + 2Q + 100/Q) ⋅ Q
Profit Function (π):
π = TR − TC
Find MC and MR:
MC = dQ dTC

MR = dTRdQ
Set MC = MR to find the profit-maximizing output before tax.

https://chat.openai.com/c/9c3da5ab-3085-4e18-b426-959a07f73e05
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2/21/24, 9:49 PM ChatGPT

After determining the profit-maximizing output before tax, you can then proceed to address the tax-
related questions. If you provide additional details or clarify any specific aspects, I can assist you
further.

https://chat.openai.com/c/9c3da5ab-3085-4e18-b426-959a07f73e05
2