Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Question
Chapter 11, Problem 5E
a)
To determine
To find: The total revenue and marginal revenue.
b)
To determine
To find:Average total cost and marginal cost.
c)
To determine
To find: The profit maximizing price and quantity.
d)
To determine
To find:The
e)
To determine
To discuss:The effect on part c due to government selling price $6 and the profit or loss, thereafter.
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The Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed has resulted in the following estimated demand function for the bed:P = 1760 - 12QThe cost analysis department has estimated the total cost function for the poster bed asTC = (1/3)Q3 - 15Q2 + 5Q + 24,000a. Calculate the level of output that should be produced to maximize short-run profits. b. What price should be charged? c. Compute total profits at this price-output level. d. Compute the point price elasticity of demand at the profit-maximizing level of output. e. What level of fixed costs is the firm experiencing on its bed production? f. What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated?
The
Poster Bed Company believes that its industry can best be classified as monopolistically competitive. An analysis of the demand for its canopy bed
has resulted in the following estimated demand function for the bed:
P = 1,265-9Q
The cost analysis department has estimated the total cost function for the poster bed as
TC = -15Q3 +5Q +24,000
Short-run profits are maximized when the level of output is
The total profit at this price-output level is
The point price elasticity of demand at the profit-maximizing level of output is
The level of fixed costs the firm is experiencing on its bed production is
What is the impact of a $5,000 increase in the level of fixed costs on the price charged, output produced, and profit generated?
Price Charged
Output Produced
Profits Generated
Increase No change Decrease
O
O
and the price is $
O
O
The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and The New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Star faces the demand and cost schedules shown in the spreadsheet that follows:
a- Create a spreadsheet using Microsoft Excel (or any other spreadsheet software) that matches the one above by entering the output, price, and cost data given.
b- Use the appropriate formulas to create three new columns (4, 5, and 6) in your spreadsheet for total revenue, marginal revenue (MR), and marginal cost (MC), respectively. [Computation check: At Q = 3,000, MR = $0.50 and MC = $0.16]. What price should the manager of the El Dorado Star charge? How many papers should be sold daily to maximize profit?
c- At the price and output level you answered in part b, is the El Dorado Star…
Chapter 11 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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