The factors that must be considered while taking decisions to increase the profitability. Concept introduction: Marginal Analysis tool in the hands of producers to find out the profits and the associated cost with an activity.

Question

QUESTION 1 Demand equation for a product is P = 100 – 0.01Q and the total cost is TC = 50Q + 10000 - (a). Write down the equation for the total revenue. (b). Write down the equation for the profit. (c). Find the value of Q when the firm breaks even. (d). Determine the maximum profit and the value of output (Q) at which profit is maximum.

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Question

Chapter 1, Problem 2.4PA

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The factors that must be considered while taking decisions to increase the profitability.

Concept introduction:

Marginal Analysis tool in the hands of producers to find out the profits and the associated cost with an activity.

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QUESTION 1 Demand equation for a product is P = 100 – 0.01Q and the total cost is TC = 50Q + 10000 - (a). Write down the equation for the total revenue. (b). Write down the equation for the profit. (c). Find the value of Q when the firm breaks even. (d). Determine the maximum profit and the value of output (Q) at which profit is maximum.

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A. At XYZ Restaurant, which sells only pepperoni pizza, has the cost profile: [Note that variable costs are per pizza] Fixed Costs Variable Costs General $1,500 Flour $0.50 Labor Rent $3,000 Yeast s0.05 Insurance $200 Water $0.01 Advertising $500 Cheese $3.00 $450 Pepperoni $2.00 Utitilies Total $5,650 Total $5.56 Based on the total variable expenses per pizza, we now know that XYZ Restaurant must price its pizzas at $5.56 ($0.50 + $0.05 + $0.01 + $3.00 + $2.00) or higher just to cover those costs. We also know that if the pizzeria charges $10 for the finished product, then it receives $4.44 per pizza to contribute to the fixed costs and ultimately the restaurants overall profits. Question: How many pizzas does XYZ Restaurant need to sell at $10 each to cover all those fixed monthly expenses?