Answered: Syukri, Iqmal and Amir run the only…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Syukri, Iqmal and Amir run the only shop in Wang Ulu. They sell electrical goods such as televisions, washing machines, etc. However, their objectives are different from each other. Syukri wants to make as much profit as he can. Iqmal wants to sell as many goods as he can without losing money, and Amir wants to earn as much revenue as he can. The graph below illustrates their respective profits. Note: The length of each square on the Y-axis represents RM100, and the length of each square on the X-axis represents 100 units 1 what is quantity for syukri? 2 what is quantity for iqmal? 3 what is quantity for amir? 4 what is price for amir? 5 what is price for iqmal? 6 what is price for syukri? 7 what is the profit for amir? 8 what is the profit for iqmal? 9 what is the profit for syukri?

Expert Solution

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Step 2

Point A is Profit maximization for Syukri Because here MC= MR, which satisfy the condition of profit maximization

Point B is Revenue Maximization for Amir because here it would occur at the point where the extra revenue from selling the last marginal unit (i.e. the marginal revenue, MR, equals zero). If marginal revenue is positive, an extra unit sold must add to total revenue and revenue maximization will not have been reached. Only when marginal revenue is zero will total revenue have been maximized.

Point C is Sales Maximization for Iqmal, here AR = AC Which means sacrificing some short-term profit with a view to achieving a longer-term gain

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