Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 10.6, Problem 2QQ
To determine
Changes in output when price changes.
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A profit-maximising firm in a competitive market is currently producing 1,000
units of output. It has average revenue of $50, average total cost of $40 and fixed cost of $10,000.
a) What is its profit?
b) What is its marginal cost?
c) What is its average variable cost? Is the efficient scale of the firm more than, less than or exactly 1,000 units?
A firm has a price of 18$ per unit for its products while it has a variable cost of VC = q2 + 2q where q is the level of output. In addition the firm has a fixed cost of 20$.
a. Write the profit function
b. Calculate the level of output which will maximize the profit
c. Show that the critical (stationary ) point is a maximum point rather than a minimum.
d. At this output level, what is the total profit?
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The manufacturer of smart printers is trying to decide what price to set for its product. The demand and cost function are assumed to be as follows: P = 80 -2Q TC= 160 +50Q-1.5Q ²a. What price should the company charge if it wants to maximize its profit in the short run? What is the optimal quantity for the printer following this optimal price? b. What price should it charge if it wants to maximize its revenue in the short run? What is the optimal quantity for the printer under this price? What will be the maximum revenue?
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- Consider a kettle firm A in a perfectly competitive market. Table 1 shows the quantity produced per hour (Q) and the total cost (TC) in the short run. Quantity 0 12345C70 2 6 8 Total cost 17 30 40 55 75 100 130 165 210 Fixed cost 17 17 17 17 17 17 17 17arrow_forwardKK ltd produces goods for sale. From trend analysis the management accountant established a demand function of the product to be P=40−1.5q, where P is the unit selling price and q is the quantity in thousands. The enterprise has been producing under the cost TC=q2+10q+50, where TC is the total cost in thousands of cedis.Required1. What is the optimal price to maximize profit?2. Determine the maximum profit and the sale revenue at this point.arrow_forwardA profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed cost of $200.a). Is the efficient scale of the firm more than, less than, or exactly 100 units?arrow_forward
- Marketers strive to deliver a profitable product for their firm. Marketers must understand break-even point calculations and sales targets. Your firm has the ability to produce and sell 10,000 units with a variable costs are $350 per unit and your fixed costs are $250,000, what price must you charge to achieve $100,000 gross profit? Show your equations and calculations. short answerarrow_forwardA competitive firm has following SHORT RUN cost function: C = 4 + 2q3- 4q2 + 20q Answer:(a) Obtain in a table average total cost (ATC), average variable (AVC) and marginal costs (MC). Plot on a graphb) In what price interval will firm offer zero output? Identify on your graphc) Identify the supply curve in graphd) At what price will firm offer exactly 8 units?arrow_forwardAMCO is a firm producing tables in Spain. It has a fixed cost of 100$ and a cost per unit of production of 2$. The demand function for a table is given by: P = 60 - 4Q 1. Find the equations of TR and TC. 2. Write down the equation of the profit. 3. Find Qwhen TR = 0 (x-intercept/roots). 4. Find Qwhen TR is a maximum. 5. Deduce the maximum total revenue (TR max).arrow_forward
- Many companies start with cost to determine price since revenue must cover cost for the firm to make a profit. True Falsearrow_forwardDiscuss the importance of price elasticity of demand, income elasticity of demand and cross price elasticity of demand to a sales manager selling soft drinks like Coca Cola If a firm faces the Marginal Cost schedule MC = 180 + 0.3Q2 and the MR schedule is MR = 540 = 0.6Q2 and that Total Fixed costs are $65. What is the maximum profit it can make? Assume that the second-order condition for maximum is metarrow_forwardKK ltd produces goods for sale. From trend analysis the management accountant established a demand function of the product to be P=40−1.5q, where P is the unit selling price and q is the quantity in thousands. The enterprise has been producing under the cost TC=q2+10q+50, where TC is the total cost in thousands of cedis.Required3. At what quantity does the firm break even? 4. Calculate the price elasticity of demand at the point and explain your answerarrow_forward
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