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 8E
a)
To determine
To Evaluate: The following in the unregulated environment,
- Price to be charged by firm
- Output to be produced
- Total Profits
Rate of return that the firm earn on its asset base.
b)
To determine
To Evaluate: The following is the firm charges the price of $100 for each unit of output.
- Total Profits
- Rate of return that the firm earns on its asset base.
c)
To determine
To Evaluate: The following if the commission has ordered the firm to charge a price that will provide the firm with not more than a 10 percent return on its assets.
- Price charge by firm
- Output produced by firm
- Earned Dollar level of profits
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Zar Island Gas Company is the sole producer of natural gas in the remote island country of Zar. The company's operations are regulated by the State Energy Commission. The demand function for gas in Zar has been estimated as: P = 1,000 − .2Qwhere Q is output (measured in units) and P is price (measured in dollars per unit). Zar Island's cost function is: TC = 300,000 + 10QThe firm's asset base is $4 million.In the absence of any government price regulation, determine Zar Island's optimal (i) output level, (ii) selling price, (iii) total profits, and (iv) rate of return on its asset base.
Q3.
The management of a manufacturing company has the
following information:
Revenue function: R = 2700Q – 15Q?
Profit-maximizing price is 1500 units.
1\ Using the above information, determine the
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i. Profit-maximizing quantity.
ii. Revenue-maximizing quantity.
2\ Suggest a cost function which results in a maximum
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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?
Chapter 11 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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